Will DeFi mark the end of centralized swap services?

over 2 years ago (Edited)

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I stumbled upon Decred (DCR) couple of years ago. Impressed with its technology and potentials, I was eager to add a few to my portfolio. With a worth of just about $15 per coin, Decred was astonishingly undervalued and was yet to achieve prominence in the crypto space…a phenomenon which still persists, in my opinion. Listed on just a few exchanges at this time; the obscurity that surrounds Decred at this time and also my personal lack of information formed major obstacles for me as I struggled to make a purchase.

Well, a very long story cut short, I resolved to make a quick swap using Changelly. Changelly featured an easily understandable technology which allowed cryptocurrency enthusiasts swap cryptocurrencies from their own convenience. It saves users the stress of creating accounts on custodial exchanges, especially in cases like mine where the only alternative was creating a new account on a new exchange.

Buying cryptocurrencies from custodian exchanges could really be a nut to crack. Despite the fact that contemporary custodian exchanges are furnishing their services to simplify using their platform for routine cryptocurrency swaps, one would still opt for an easier alternative…if they exist. The stress of creating user profiles on cryptocurrency exchanges is a huge turn off for cryptocurrency enthusiasts, especially when you’re addicted to the idea of ‘doing it faster’. For exchanges requiring KYC verification, this burden is multiplied.

Using the Changelly there are only two requirements, the cryptocurrency you wish to swap (of course!) and a recipient address. Having initiated a swap activity on the activity and transferred the cryptocurrency you wish to exchange to the provided address, Changelly handles the core aspects of the exchange and transfers the exchanged cryptocurrencies to the wallet whose address you provided. Changelly integrates with the best custodian exchanges and provides the best rate for your swap. I quickly swapped a few BTC for…a few DCR. The experience was exciting one for someone who is pretty much new to cryptocurrency and blockchain technology.

Platforms such as Changelly continued to emerge as I quickly discovered a handful of similar platforms. Centralized cryptocurrency swap services grew to their peak prominence about a year ago. Their frequent collaboration with top tier exchanges endowed them with all flares of efficiency. Changelly, ChangeNow, SimpleSwap; to mention a few. These platforms where not only similar in the services they offered but always in the efficiency of these services.

Unfortunately, DeFi also gained prominence at the time these centralized platforms were enjoying their biggest publicity. Many Decentralized finance platforms in addition to other financial services featured sophisticated decentralized swap platforms which allows users exchange cryptocurrencies in the most secured ways.

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These decentralized swap platforms posses a marked similarity with centralized alternatives. Users who are familiar with centralized cryptocurrency swap platform will notice a sharp similarity between the much older centralized swap platforms and the newer decentralized option.

Decentralized swap platform brings in a whole lot into play, they present what centralized swaps claimed to be…and many more! Liquidity pools, liquidity benefits, farms, staking pools; decentralized services and related DeFi platforms deserved the whole love they enjoyed from cryptocurrency communities.

It was love at first sight for cryptocurrency enthusiast. Uniswap, the most popular decentralized exchange on the ethereum blockchain quickly became a commanding figure in the crypto space. With billions on transactions swimming through the platform, ethereum transaction fees were soon sent into a frenzy. Platforms similar to Uniswap quickly emerged and filled the space. Rug pulls, ‘technical exploitations’, lucrative airdrops…the excitements these platforms brought filled up the minds of every cryptocurrency enthusiast. Tons of new and existing cryptocurrency projects got listed on these services. Even separate blockchain projects developed technologies to enable creation of wrapped tokens.

The quest to exploit the tremendous liquidity on these platforms at this time and the influence they had on cryptocurrency prices triggered an influx of listings on decentralized exchanges. In a space of few months, most ethereum-based smart contract projects found their way to decentralized exchanges. Cryptocurrency investors could easily perform swaps from the convenience of their wallets.

This foregoing trampled upon the growth and continuity of centralized alternatives. With most tokens already listed on decentralized exchanges and new projects listing on these exchanges easily, the need for centralized swaps have decreased tremendously, very few investors still find a reason to use these platforms.

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At some points, ethereum blockchain’s ridiculous fees posed an issue to the use of decentralized swap services. This lit up centralized swap platforms once again, however, this didn’t last for so long as many cheaper options emerged in the blink of an eye. While Ethereum’s fees is yet to be fixed, swap serviced built on Binance’s smart chain and Fantom’s Opera chain offers way cheaper option with Fantom presenting an almost fee-less solution…which is yet to be harnessed, in my opinion.

With DeFi continuing its exponential growth and decentralized swap services adding more exciting features, centralized swap services are somehow limited in their growth. This trend is even poised to go on for a long time in the foreseeable future. What will become of centralized swap services? We will probably see a few of them joining the DeFi space by enhance their technology. A good chance of a couple them folding up also exists as DeFi continues to win over the crypto space as a whole.