Few used decentralized exchanges in 2017 and 2018. Then, Ethereum and crypto traders found them a hassle to use, with it often being complicated to transact tokens, especially when factoring in an illiquid order book. This writer personally avoided DEXs at all costs, opting to stick with centralized platforms to avoid any difficulty.
This has changed though with the introduction of Uniswap. The decentralized exchange has revolutionized decentralized exchanges in two ways: 1) it has a modern UI with charts, trade information, and strong liquidity, and 2) it has an automated market maker model that means there isn’t an order book to deal with.
Ethereum-based decentralized exchange eclipses top crypto centralized exchanges
Uniswap has seen a vast spike in adoption over recent weeks due to the ongoing craze in decentralized finance where there are popular tokens being listed left and right.
“Second day in a row where Uniswap volume > Coinbase. This month, multiple DEXes like Curve, 1inch, Balancer, also have volume on par with big exchanges like Kraken, Bitstamp, Gemini, etc. Most of these CEXs have multi-billion valuations. ETH is still sub-50B mktcap.”
Second day in a row where Uniswap volume > Coinbase.
This month, multiple DEXes like Curve, 1inch, Balancer, also have volume on par with big exchanges like Kraken, Bitstamp, Gemini, etc.
Most of these CEXs have multi billion valuations.
ETH is still sub 50B mktcap.
— CL (@CL207) August 31, 2020
As Uniswap has seen this uptick in adoption, analyst Nicholas Merten noted that there is now $1 billion worth of cryptocurrency liquidity allocated to the platform, making it a viable place for traders to transact many cryptocurrencies.
Threats to Uniswap
While Uniswap’s recent surge in popularity is impressive, to say the very least, there are some threats to the Ethereum-based exchange’s primacy.
First and foremost, SushiSwap. SushiSwap, to put it as simple as possible, is a Uniswap clone attempting to one-up the incumbent.
The UI and API of this new Ethereum-based exchange are very similar to its predecessor, but SushiSwap is attempting to differentiate itself with the introduction of the SUSHI token. The altcoin, which can be mined by depositing Uniswap liquidity into Sushiswap (effectively forking the liquidity to this new platform), will be used as a governance token. SUSHI will also accrue value through SushiSwap trading fees being sent to holders as dividends.
Although the project is extremely early stage and run by anonymous founders, there are some Ethereum and crypto commentators say that SushiSwap could give Uniswap a run for its money.
There are many that also doubt this, though, especially due to potential flaws in SushiSwap code and the lack of funding that the original exchange has.
As reported by CryptoSlate, there have also been a sentiment that Uniswap as a protocol will be “unbundled.” Haseeb Qureshi, a managing partner at Dragonfly Capital that formerly worked at Airbnb and Earn.com, recently said on the matter:
“Uniswap today is the single largest “exchange” on DeFi. It routinely posts volumes larger than most centralized exchanges. Uniswap has revolutionized DeFi, brought billions of dollars in trading volume, and sparked a Renaissance in AMM (automated market maker) design. But I believe it’s inevitable that Uniswap is going to be unbundled.”
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