DEX tokens look extremely attractive to investors today.
A new report from Messari shows that tokens associated with decentralized exchanges (DEX), such as Kyber Network and Bancor, have soared an average of more than 240% in 2020, compared to average gains of around 40% for tokens associated with centralized exchanges.
The run-up shows that despite centralized exchanges significant lead in users and volume, there are meaningful benefits–and a great potential benefit–for those who support decentralized alternatives.
The Messari report explains that much of the excitement surrounding DEX tokens is caused by volume increases and recent or impending upgrades to some of the most popular decentralized exchanges.
DEX aggregators such as 1 inch Those token swaps spread across multiple decentralized exchanges to reach the lowest possible price helped bring the total DEX volume from less than $ 5 million to nearly $ 25 million when the study was released. In addition, the increase in DEX volume has doubled the trading share on all exchanges, from 0.25% to 0.5%.
While doubling market share is impressive, it still seems like reaching the prevalence of popular centralized exchanges like Binance or Huobi is still a long way off. However, the Messari report notes that achieving parity with centralized competitors is not necessary for DEX tokens to provide investors with a valuable return.
The main advantage of decentralized exchanges is the programmatic nature of their fee distribution models–anyone can check on the blockchain that the fees are properly allocated to token holders. In contrast, centralized exchanges have token burning programs (which reduce supply and thereby increase price) that can be changed by their parent organizations at any time.
Upgrades to the underlying product add new features and increase profit potential for liquidity providers and market makers on exchanges. While centralized exchanges currently offer these users the best winning opportunities, the report sees upgrades to protocols such as 0x and Uniswap as a potential catalyst for attracting these specialist operators and the volume they bring.
Since DEX’s trading volumes are already relatively small, a sustained increase may drive profit for token holders–and the corresponding value of the tokens themselves–to new heights.
The author’s views and opinions are for informational purposes only and do not constitute financial, investment or other advice.