Many government and financial institutions, including the US Financial Stability Oversight Council (FSOC), have spoken openly about their concerns regarding decentralized finance (DeFi) and the illiquidity of such digital assets trading. Decentralized exchanges (DEX) are at the core of everything in DeFi, providing the platform to connect and exchange both fungible and non-fungible tokens with others.
Uniswap Labs has published research that should lessen the fear any traditional institutions feel. It turns out that Uniswap Labs’ platform, Uniswap, which is the leading DEX built on Ethereum, has deeper liquidity than the major centralized exchanges (CEX) in the crypto space.
In a report posted on their blog, they found that Uniswap v3 has more available liquidity in ETH/USD, ETH/BTC, and other ETH pairs than some of the biggest centralized exchanges combined. When it comes to the most basic ETH and USD pair, Uniswap has twice the liquidity of both Finance and Coinbase. The ETH/BTC pair has three times more liquidity than Binance and over four times that of Coinbase.
And for other token pairs with ETH, Uniswap has more than three times deeper liquidity than the centralized exchanges. Just like the ETH pairs, the same applies to stable coin pairs. The USDC and USDT steady coin pair on Uniswap v3 has over five times the liquidity of leading centralized exchange Binance.
2/ The Protocol’s greater market depth demonstrates that crypto-native AMM market structure can surpass order-book exchanges and transform traditional financial market structure to be more liquid, stable, and secure.
— Uniswap Labs 🦄 (@Uniswap) May 5, 2022
In a thread posted on the topic, Uniswap Labs pointed out that an Automated Market Maker (AMM) market structure can surpass that of traditional order book exchanges while helping them become more liquid, secure, and stable.
At the same time, AMMs provide a great entry point for many new developers to build platforms for people to utilize. Easy liquidity creation is at the core of this, something there isn’t as easy to do in the traditional space due to the low quantity of actual market makers. On top of this, traditional markets can sometimes be overly regulated by those in power that don’t hand over any financial power to the new generations.
The DeFi movement had its boom in 2020. This period is referred in the crypto space as DeFi Summer 2020. Since then, it has done nothing but expand even further, with developers building multiple DEXs on every blockchain. It seems there is no stopping DeFi, and as billionaire Mark Cuban put it:
— CNBC (@CNBC) June 19, 2021