Bitcoin․com CEO Dennis Jarvis discusses how to make DeFi more accessible to new users and how to improve its performance when compared to centralized services.
Note that these comments were posted just before FTX imploded. It’s possible that the tweets’ authors’ views have changed since then. Still, their criticisms ring true: Current DeFi products simply cannot replace CEXs in terms of liquidity, volume, and order matching.
It’s a problem for the crypto industry when many of the biggest traders, market makers, and proponents of crypto cannot execute trades or participate in size on decentralized platforms. They’re forced to gather on risky centralized exchanges, which creates a self-reinforcing cycle of dependence on CEXs.
In the past, CEXs seemed like an agreed upon stop-gap until crypto technology was at a place where it was capable to take over. As crypto garnered more attention, I feel like the industry as a whole became complacent, distracted by the amount of money pouring in. The feeling was something like, “Those things will be solved in time.”I believe that the base crypto technological tools are all here, or nearly so.
Now the only thing it lacks is comparable liquidity. Since good liquidity begets better liquidity, a constructive first step is that dYdX uses an order book and matching engine, a much more efficient and profitable way to make markets. Using an order book should attract market makers to provide the liquidity sufficient to make DEXs comparable to CEXs.
Additionally, liquidity will come now that it’s obvious that you can’t trust these centralized intermediaries. Big players in crypto need to make a concerted effort to move out of CEXs into DeFi protocols.
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