On June 1, 2020, the Defiant community that tracks the progress of decentralized finances (DeFi), published a report about the situation on ETH-based decentralized exchanges (DEXs). Mr. Karapetsas believes that decentralized trading shouldn’t be accompanied with centralized portfolio management.
Mutually exclusive concepts
According to Mr. Karapetsas, combining centralized and decentralized instruments in the trading process makes no sense. Only when the whole system operates without a single point of centralization can it be considered decentralized:
Exchanges is just one part that needs fixing. We also need to get rid of centralized SaaS offering portfolio tracking and accounting. Can't participate in decentralized finance, only to do accounting for it via centralized apps
For him, the broadcasting of data from decentralized to centralized apps required to track the portfolio on DEX is a step backward.
So, only decentralized portfolio management systems should be used when trading on decentralized exchanges. To achieve this goal, Mr. Karapetsas recommends they ‘get rid of centralized SaaS’.
Lefteris Karapetsas worked as a Senior Software Engineer in Brainbot, the team behind the Rayden Layer-two scalability solution for Ethereum (ETH). He founded the Rotki privacy-focused investment portfolio tracker.
Bright long road for DEXs
The report Mr. Karapetsas reacted to addressed the progress of decentralized exchanges. According to its author Lucas Campbell, this sector is still in its nascent stage. Though it has skyrocketed five times over this year, DEXs account for only 0.6% of the cryptocurrency exchange segment.
The obvious champion is the UniSwap exchange, which has seen about $755M in trading volume since the beginning of the year.
Mr. Campbell highlighted that centralized exchanges process 100% more liquidity in a single day than Ethereum (ETH)-based DEXs do in a year.
The calculations of projected annual earnings of DEXs reveal very poor figures. Only four top exchanges – Uniswap, dYdX, Kyber Network and Bancor earn more than $1M monthly. To compare, Bancor, with its $1.21M projected earnings, makes 0.79% of what they managed to raise through the BNT ICO in 2017.