The rise of DEX robots: AMMs push for an industrial revolution in trading

Sunday 09 May 2021, 10:29 PM AEST - 1 month ago

Centralized exchanges play an important role in the cryptocurrency industry. While their decentralized exchange counterparts have been growing in popularity and usage since 2020, the overwhelming majority of crypto trading volume is still concentrated on centralized exchanges.

The supremacy of CEXs can be clearly observed in the size and popularity of trading platforms like Binance and Coinbase, which are now so recognizable and mainstream that Coinbase has recently become the first crypto company to be listed on the Nasdaq stock exchange.

Acting as a necessary bridge between fiat and crypto, centralized exchanges provide unparalleled convenience. Nevertheless, industry leaders often see these types of exchanges as one of cryptos single points of failure. Sergej Kunz, co-founder of 1inch Network — a DeFi platform offering automated market makers and other related services — believes that AMMs will be the main competition for centralized exchanges. He told Cointelegraph:

In the next four to five years, the DeFi industry will grow a lot. We will eliminate intermediaries, such as banks, and replace them with DeFi. In the upcoming years, 1inch is going to be ready to compete with centralized exchanges for users who swap assets a few times a day.

Another factor fueling the interest in DEXs is the security concerns. Although malicious attacks on exchanges have become less frequent, exchanges have repeatedly proven that they are vulnerable to hacks and information leaks.

More decentralized alternatives aim to provide an answer for those concerns, and one way to do it is through the use of the automated market maker on exchanges.

The history of AMMs: From zero to hero

AMMs are the latest prominent breed of DEX protocols. They do not rely on order books like regular exchanges but instead use mathematical formulas to calculate the price of assets.

AMMs also provide liquidity from different pools, excluding the need to have another user on the other side willing to trade. ...

Read full story on Cointelegraph

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