On May 14, US-based cryptocurrency exchange Coinbase published a new report that shed light on some major developments in the blockchain and cryptocurrency space. Most notably, Coinbase has said that while there is still a few years to go, the decentralized exchange (DEX)
Coinbase suggests that there is a potential DEX revolution looming, noting that centralized exchanges or points in the market can act as “choke-points that stand in contrast to the open, decentralized ethos of cryptocurrency.” DEXs, they say, are safer, censorship resistant, potentially faster and require few personal details, if any.
However, they also state that there are several challenges that are preventing DEXs from being adopted further, most prominently in terms of usability and scalability. DEXs until now have attracted mostly the tech-savvy, and the self-custodial nature can be off-putting for a wide group of users. The difficulty in scaling DEX transactions to an appreciable commercial level - something that is being worked on - is also a major hindrance. Regulation also poses threats.
But Coinbase is optimistic and sees these challenges as solvable,
But what gets us excited? All the above issues seem tractable. They boil down to product and technology challenges that have conceptually clear paths forward. Eventually, we should be able to create a DEX that rivals the trading experience of centralized exchanges, while retaining all their native benefits. When this day comes, centralized exchanges could be ripe for disruption.
DEXs makeup a small, but critical, portion of the DeFi space. Source
DEXs are a cornerstone of the the decentralized finance (DeFi) space, making up for under 10% - perhaps not much in terms of numbers, but it is certainly a vital part of the infrastructure. An increasing number of developments are taking place in the space, including promising upgrades like the zk-Rollup upgrade released by DEX protocol developer Loopring (LRC).
Interoperability, scaling solutions and usability refinements all point to a DEX-based future, and Coinbase is not pessimistic about progress,
How close are we to this reality? It’s difficult to say with certainty, but considering the long development timelines associated with shipping code to blockchains, and the slow-but-steady growth in those key areas to watch, it’s not unreasonable to think the DEX revolution is still a few years away.
Fresh off of the Bitcoin halving, developments and the general state of the cryptocurrency industry are being scrutinized, as a greater number of established entities begin to consider Bitcoin as a legitimate asset.
Besides the developments of the DeFi space, Coinbase also talked about Bitcoin’s dominance and the tokenization of assets. The exchange is working with JP Morgan Chase for banking services, it was recently announced.