While centralized exchanges are believed to be more secure and efficient, advocates of decentralized platforms like Tim Shan insist that the user experience on decentralized exchanges has improved. Also, the inherent benefits associated with decentralized exchanges, such as self-custody of assets, make them seem more attractive than centralized exchanges.
Decentralized Exchanges Bridging the Gap
Despite seemingly having the advantage over centralized exchanges (cex), according to Tim Shan, the COO of dexalote, decentralized platforms still fall short when it comes to the number of users or the volumes traded. Part of the reason for this is that cex platforms are often perceived as more secure and perhaps much faster and cheaper to use than decentralized exchange (dex) platforms.
Although being slower and more expensive “is not a good match for dexs,” Shan insisted in his written responses sent to Bitcoin.com News that ongoing innovations and improvements are helping decentralized platforms bridge the gap. Furthermore, Shan believes that the inherent benefits of decentralized finance (defi) platforms, such as self-custody, make dex platforms more attractive than even the most trusted centralized exchanges.
In addition to making the case for dex platforms, Dexalot’s COO also shared his thoughts on regulating the blockchain and cryptocurrency industry, particularly in the wake of industry-shaking incidents such as the FTX crash. . Below are Shan’s responses to the rest of the questions submitted by Bitcoin.com News.
Bitcoin.com News (BCN): Why do users, especially inexperienced ones, trust centralized platforms instead of decentralized exchange (dex) platforms?
Tim Shan (TS): Well, I think there are two main drivers here. First, this is still a fledgling industry, and the average crypto investor is still more familiar with online banking and brokerage accounts. Centralized platforms give them that familiar experience, where investors’ assets are in their hands, transactions are fast and cheap, and there is a semblance of security.
Also, it’s kind of human nature for people to “follow the herd”, especially if they see high daily volumes or TVL (Total Value Locked) and a lot of hype on crypto Twitter from executives and influencers. Obviously, we saw last year that perceived security was not guaranteed for several large centralized entities and many large and small crypto players were severely affected.
I think a second hurdle blocking the mass migration from cex to dex (platforms) is the ease of use of the wallets. Although I use Metamask myself today, it’s just not easy enough to use. When cryptocurrencies can create products for a different demographic, like children and the elderly, those barriers will come down for everyone.
Right now, using a wallet is still like the early days of the personal computer, where a lot of the complicated technical features are revealed on the front end when they really shouldn’t be seen by the average user. That being said, new wallets like Avalanche’s Core solve many of the pain points I just mentioned and bring about new user experiences that will help “grow the pie”.
BCN: What lessons can decentralized platforms learn from their centralized counterparts that can potentially help them gain more users?
TS: There is a technical disadvantage that dex (protocols) have vs. cex (platforms). Decentralized exchanges operate on blockchains, and depending on the blockchain a dex is built on, users will likely experience slower speeds and higher transaction costs than on centralized exchanges. Slower and more expensive is not a good combination.
However, blockchains are constantly improving and one such chain is the new Avalanche subnet. This subnet allows crypto projects to build their own custom blockchains for specific use cases, such as more transactions per second, faster overall speed, lower and near-zero fees, and performing compliance checks.
These blockchain innovations not only substantially reduce the gap between decentralized and centralized exchanges, but also provide significant benefits inherent to defi, such as users keeping their assets in their own crypto wallets. There is no need to trust a company and its employees to hold your assets. And there is full transparency of activities on the blockchain.
BCN: How do you think the regulatory landscape for the Defi space will evolve and could bad decisions by regulators set the industry and innovation back a few years?
TS: For us defi projects, this is the big question. Until now, regulators have mainly focused on centralized platforms, as they have considerable experience in dealing with entities that hold client assets, such as banks and brokerage firms. If you think about it, there is very little difference between a cex and a broker in the way they operate. Both provide custodial services for client assets, provide clients with the ability to trade, and both may use some of all client assets for their own gains, such as short-term investments or loans.
However, defi is a different animal given that there is no escrow and users interact with smart contracts that are open source. I think what regulators will do is not so much go after defi but the instruments that are traded on it, like stablecoins and others, classifying them as “securities”.
BCN: Why did you choose to build Dexalot in Avalanche?
ST: We believe Avalanche offers unmatched blockchain technology that delivers sub-second speed (time to completion) and enables application-specific horizontal scalability across subnets.
BCN: You have launched a subnet in Avalanche. Can you explain what it is and how it would benefit users?
ST: A subnet is essentially an independent blockchain that offers all the technical features of Avalanche but with only Dexalot integrated. This allows us to optimize the chain in areas as important as safety, speed, cost of gas and compliance. The subnet also allows us to easily integrate with multiple chains. We launched an integration with Avalanche’s C-Chain and plan to integrate with other chains in the coming months as well.
What are your thoughts about this interview? Let us know what you think in the comments section below.
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