Crypto’s Peer-to-Peer Exchanges Lose Ground in a Shrunken Market
Crypto exchanges that connect buyers and sellers directly without Wall Street-style middlemen are under pressure to improve their services amid a decline in market share.
These so-called decentralized platforms facilitate trading via algorithmic, blockchain-based software known as smart contracts, with users retaining custody of tokens rather than handing them to an intermediary institution.
Crypto diehards predicted a golden period for peer-to-peer trading venues such as Uniswap and dYdX after last November's collapse of the FTX exchange, which undermined trust in centralized platforms that take control of tokens.
But that hasn't panned out: monthly spot trading volumes on decentralized exchanges slid 76% to $21 billion by June this year versus January 2022, more than the 69% drop for their centralized rivals to $429 billion, Kaiko data shows. The market share of peer-to-peer digital-asset platforms has dropped to 5% from a 2023 peak of 7% achieved in March, according to the figures.
Decentralized platforms appeal to crypto buffs who dislike the intermediary model of traditional finance. But they are often hamstrung by more complex user interfaces, slower speeds and lower liquidity than key centralized venues like those offered by Binance Holdings Ltd. or Coinbase Global Inc.
Most institutional investors find it difficult or impossible to trade on peer-to-peer exchanges, though their “designs continue to improve and the platforms are still generally less than thee years old,” said Richard Galvin, co-founder at Digital Asset Capital Management.
Examples of efforts at improvement include a recent new protocol from Uniswap, the largest decentralized trading venue, which seeks to improve prices for clients by aggregating
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