DeFi decentralizes the entire financial system. It does this by removing the necessity to believe centralized parties, pulling back the curtain that hides the inner workings of complex financial institutions, opening a myriad of financial services to anyone. Conventional banking activities such as lending, trading, and insurance become digital in an open, permissionless, and decentralized manner.
DeFi has the potential to be one of the most transformative technological changes in human history. Not only because of the breadth of DeFi’s impact on the global financial system, but also because of the impact it could have on billions of people who are currently unable to participate in the economy. With such massive implications for DeFi, it is unavoidable that it will gain traction.
With the recent rise of DeFi, there has been a correlated rise in Decentralized exchanges too. Cryptocurrency exchanges provide a crucial source of liquidity to the global cryptocurrency market, facilitating billions of dollars in trading volume. Leading exchange platforms continue to scale in response to the demand for digital assets as the market grows. The same thing happens in the decentralized world with DEXs.
Advantages over centralized exchanges
Although centralized exchanges account for the vast majority of market activity, the growth of DeFi has created room for the development of decentralized crypto exchange protocols and aggregation tools.
DEXs have certain advantages over their centralized counterparts. Users don’t have to compromise with their Wallet Private Keys to trade. DEXs bring the benefit of security. Most of the DEX’s use some form of distributed hosting which minimizes the risk of infiltration and attacks. For a project to get listed on a DEX, the fees would be much less when compared with a Centralised Exchange.
Bringing mass adoption to DEXs
Currently, one of the main factors holding back DEX’s adoption is a lack of liquidity on the platform. Users do not understand how it works and did not want to trade on such exchanges and did not deposit. As a result, the spreads in the order book (the difference between the closest buy and sell prices) could reach tens of percent. This was especially noticeable in pairs with unpopular assets.
To provide liquidity solutions, a platform needs to have massive adoption increasing the volume. ChilliSwap, a newly launched Decentralized exchange, aims to increase mass adoption by introducing multiple new features on a single platform. The platform has a wide range of tokens, better liquidity, staking facilities, and an analytical tool to validate the listed tokens on the platform. They are additionally planning to launch an NFT platform to expand their ecosystem.
ChilliSwap endeavors to provide users with opportunities to expand cryptocurrency collections and improve its liquidity using an open forum. It is a platform that offers opportunities to provide goods and services to peer-to-peer businesses. As a result, ChilliSwap provides excellent scalability options for both users and investors.
With such a massive ecosystem, ChilliSwap has the potential to bring mass adoption to not only their platform but also the DeFi space.
The Influence of DeFi
The rise of DeFi is significant for DEXs; their very nature solidifies the ideology of a decentralized digital future that is accessible to all. It serves as the ideal financial model for the millions of unbanked people around the world, as well as those who face difficulties obtaining funds from centralized institutions. DeFi is particularly well-suited to emerging economies and countries with limited access to traditional financial services, as it provides credit, exchange, and investment opportunities.
Although DeFi is a massive digital disruptor in the crypto space, widespread adoption will take time as they face competition from banks, regulatory restrictions, and technological changes. In fact, blockchain technology advancements have played a significant role in DeFi’s evolution. However, in time, DeFi will have a significant impact on the global financial market and the emerging economy of digital natives. As a result, in order to maintain and accommodate the emerging digital world and operations, decentralized exchanges will have to closely follow DeFi’s growth.
