The question is whether the decentralized exchange is lame or profitable ? I got a good review on this matter : https://cryptogeek.info/en/blog/decentralized-exchanges-pros-and-cons. Actually, I think that decentralized exchanges are getting popular and I don't know a good reason not to use them. But, maybe I missed something, is there other opinions or ideas?
Answer to your question is pretty much subjective. There is no right or wrong answers. Anyhow personally I'll use banks for small transactions like paying for coffee but use of Decentralised platform for the transfer of big amount is more suitable.
Since most of the banks charge percentage of what you transfer. But in the Decentralised platform like Bitcoin and Ethereum you can make a transaction in
$0.03 to $2.30 (Average transaction). No matter what the transaction amount is. I read an article about how a person transferred Taylor Swift's network of Bitcoin in under
There are many other reasons as well.
When you increase the decentralization of an application on one side you generally decrease the performance and the user experience on the other.
If we take the case of a DEX, here are some limitations :
- Performance :
- low liquidity : 98% of the trades are made on centralized platforms. This involves a very low liquidity on the decentralized ones and therefore a high volatility, which can repel many traders.
- Few features: most of the DEXs support only limit orders (some also support market orders) whereas the centralized exchanges propose now complex features such as stop-loss orders, margin trading or derivatives.
- Blockchain interoperability issue : It's easy to trade Ethereum tokens in a decentralized way. But how do you do to trade cryptocurrencies from two different Blockchain protocols ? You can do it with what we call "atomic swap" but that's currently limited because the two Blockchains must share a great part of their cryptography.
- If you're the platform, how do you update the order book in real time ? Indeed, if you let the user sign and broadcast the transaction responsible for filling the order you have to wait for it to be mined before updating the order book. This may conduct to very poor performance. That's why some DEXs prefer to sign themselves the transaction responsible for the trade settlement using a system of meta-transaction. Theses exchanges are therefore much less decentralized.
- User experience
- Do the user need Metamask to use the DEX ? If yes, your application becomes much more difficult to use for non technical users.
- Before being able to trade on a DEX, users have generally to perform some actions involving Blockchain transactions such as approve the DEX smart contract and make a deposit. Once again, that can be barrier for non-technical users.
- On an Ethereum DEX, who pay the gas ? If it's the user, he has to own some ethers in order to use the application.
The list above is not exhaustive but presents some of the current limitations of the DEXs.
Let's keep in mind that Blockchain is a very young technology, not yet mature. There are plenty axes of progression and the development of DEXs is great one.