Over the past five years, decentralized exchanges (DEXs) have emerged as a programmatic, self-custodial way for cryptocurrency investors to trade, according to a new report commissioned by Blockchain data platform Chainalysis.
The study explains that fifteen months ago, DEXs first eclipsed centralized exchanges (CEXs) in on-chain transaction volume.
It notes that DEXs allow users to swap between hundreds of trading pairs without an intermediary.
The findings show that while most CEX transactions happen off-chain on centralized databases to save on transaction fees, every DEX transaction occurs via smart contracts on-chain, which according to the report, explains why DEXs now have a confident lead: from April 2021 to April 2022, $175 billion was sent on-chain to CEXs, well below the $224 billion sent to DEXs.
The study reveals that the transaction volume at these exchanges is closely correlated with market performance, noting that the CEX transaction volume reached an all-time high in late 2017 as Bitcoin climbed to its all-time high.
Moreover, the report points out that DEX transaction volume similarly skyrocketed in 2021 as crypto tokens like Ethereum and Solana multiplied. However, with the recent market slump, the amount sent to both exchange types declined, with CEXs proving slightly more resilient than DEXs this time, according to the analysis.
Data indicate that the balance first shifted away from centralized to decentralized exchanges in September 2020, when centralized exchanges supported below 50 percent of on-chain volume for the first time.
The report observes that DEX dominance then reached its peak in June of 2021; that month, DEXs facilitated more than 80 percent of transaction volume.
Today, according to experts, the on-chain share of volume is more evenly split, with 55 percent happening on DEXs and 45 percent on CEXs.
