Since the inception of decentralized exchanges (DEX) a few years back, there has been a significant shift away from the conventional centralized exchange (CEX). This has, however, led to several debates regarding which exchange model can stand the test of time.
Although both arguments hold a lot of weight at either end owing to various factors involved, DEX, on the other hand, has continued to attract massive investment despite being around for barely half a decade.
Currently, there are at least 35 active DEX platforms built on different blockchains, and the market is still waxing stronger with no sign of slowing down in sight. Yahoo Finance also reported that DEX trading volume had further peaked above $140 billion. And that figure keeps rising.
Now, there has been a lot of controversy about the long-term viability of DEXs, and some industry experts are of the opinion that both DEX and CEX must coexist in order to stay sustainable.
One forward-thinking blockchain startup, rather than wasting time waiting to see who would win the race in the long run, has built a solution that allows both CEX and DEX exchanges to coexist seamlessly.
123swap, a decentralized cross-chain network, wants to bridge the gap not only between DEX and CEX, but also to enable interoperability among different blockchains’ smart contracts.
During an exclusive interview with DailyCoin, Tomas Ambrazas, the CEO at 123swap, discusses the current state of crypto exchanges and how the barely two-year-old startup wants to revolutionize the overall trading experience using its custom solutions.
123swap was created as a result of many factors, one of which includes the challenges and non-scalable factors inherent in the centralized exchanges. Ambrazas addressed some of the major setbacks of CEX that have facilitated the rapid expansion of DEXs.
According to him, there has been an increase in the number of active blockchain systems over the years, which further implies an even bigger increase in the number of crypto tokens operating across the respective blockchains.
Ambrazas further opined that it has become extremely challenging for CEXs to accommodate the majority of these tokens, especially when it comes to the execution of such trading activities as swapping and yield farming.
Ambrazas said the current trading reality is that every blockchain wants to have its custom tokens hosted within its network.
Using Ethereum as an example, Ambrazas noted that about 90% to 95% of most utility tokens were hosted on the blockchain. Fast forward to now, and things are moving a little bit differently.
“Unlike a few years back, we now have more alternative blockchains like Binance chain, Harmony chain and Polkadot, among several others. The implication of this is that a good blockchain token, which is mostly designed to be interoperable, can now be hosted on multiple blockchains, it could be 5, 10, or even more,”
Ambrazas pointed out that USDT’s Tether stable coin was once Ethereum’s most used stablecoin before blockchain interoperability became possible; now, the stablecoin is also traded on other blockchains like TRON, where it is now getting more transitions than in Ethereum.
So, how does this work in the case of a centralized exchange?
“Basically, if you want to add a token to a CEX platform, you must also add every blockchain that it supports. A DEX platform, on the other hand, simply adds a blockchain and makes all host tokens available on the platform. And that’s exactly the primary solution DEX exchanges are offering,”
Furthermore, Ambrazas stated that for a token to be listed on a CEX platform, it must achieve a certain liquidity requirement, which in most cases is unrealistic for the majority of crypto projects, particularly those that are just getting started. On a DEX platform, however, this is not the case.
Ultimately, CEX cripples the chances of scalability for most tokens, while DEX, on the other hand, is designed to help tokens quickly scale, even in a short period.
123swap Will Bridge the Gap Between DEX and CEX
Having highlighted some of the setbacks with CEX, and given expert’s advice on CEX-DEX coexistence, 123swap built a solution that eliminates the disparities between the two exchanges.
For instance, the platform bridges the gap where an integrated CEX platform is lacking and subsequently interfaces with DEX platforms such that both worlds can equally benefit from each other.
“Our solution [is to] complete Binance smart chain and Ethereum chain’s edits for swaps, farming, yield products, as well as their governments. So you can use the two most popular chains for all swapping, and farming. You can likewise, add, and remove liquidity, as well as check all our systems to see how it’s working. It’s live and fully working,”
Ambrazas further mentioned that the team is currently working on adding what he described as the best bridging system for interoperability between Binance and Ethereum. They are also working on adding more multi-chain bridges, which will enable them to add more chain networks in the future.
The ultimate goal, according to Ambrazas, is for end-users to be able to seamlessly swap from one token to another across different exchanges and blockchains and to do so on a single marketplace.
On The Flipside
- Because 123swap is still in its early phases, the solution is limited to only a few exchanges and blockchains for now.
- It will take some time for the platform to integrate APIs from various blockchain networks seamlessly.
Why You Should Care?
Despite popular belief, the future of trading may not be limited to decentralized exchanges, since both CEX and DEX systems provide distinct advantages. As a result, adopting a platform that connects the two ecosystems opens up even more possibilities.
You can watch part one of the interview here: