October data indicates that decentralized exchanges (DEX) witnessed a drop in trading volume of 23 percent for the month, dipping to $18.46 billion from $24 billion in September according to a report by The Block Crypto.
DEX Trading Volume Drops
According to data released by Dune Analytics, which monitors volumes in the DEX ecosystem, October’s volume numbers signify the first decrease since April 2020, a drastic difference from the nearly 103 percent month-over-month rise from August to September.
October is the first month since April in which decentralized trading volumes have decreased significantly and the extent of the decrease reveals a noticeable shift in the crypto community’s focus. This may indicate a cooling off of interest in DeFi
Decentralized exchanges, or DEXes, enable users to exchange crypto tokens without first giving up ownership of their coins as with centralized exchanges.
In order to align orders with pools of liquidity offered by other protocol customers, trades are carried out right on the blockchain, using smart contracts.
What Makes Something DeFi?
Decentralized markets are part of a larger collection of protocols known as DeFi, or decentralized finance, aimed at replacing centralized services, such as centralized crypto-exchanges and banks, with blockchain-based financial goods and services.
DeFi centers around applications such as dapps (or decentralized apps) that execute financial functions on distributed ledgers called blockchains, a technology that was developed by Bitcoin but has more widely caught on since then.
Dapps encourage individuals to lend or borrow funds from another, go long or short on a number of securities, swap cryptocurrencies or gain interest in a savings-like account. Transactions are directly between parties, mediated by smart contract systems, rather than exchanging at a centralized cryptocurrency exchange
In order to build dynamic financial services, all of these dapps will communicate and interact. Stablecoin investors can, for instance, contribute assets to a liquidity pool.
From this, creditors will lend by putting up more collateral than the loan sum. Interest relies on the asset’s moment-to-moment value.
The absence of a central market applies to “decentralization.” Smart contract applications for the DeFi protocols themselves are run by a group of engineers and programmers using open source tools.
$3.7 billion in crypto-assets were invested in this way as of August 2020; the sum was $7.8 billion as of September 2020. As of October, TVL has hit a cooling-off period.
