Decentralised finance (DeFi) was one of the top stories of 2021, as evidenced by the volumes of trade that passed through decentralised exchange platforms (DEX). These exceeded $1 trillion, an increase of 858% compared to 2020.
DEX volume has increased by 858%
Decentralised exchange platforms have posted more than $1 trillion in transaction volumes over the year 2021, according to the annual report published by analytics platform The Block.
This figure represents a huge 858% increase over the trading volumes that DEXs saw over the year 2020, based on data as of December 23. Last year, just over $115 billion was traded on these decentralised platforms.
Cumulative monthly volume of decentralised trading platforms (Source: The Block Report)
Monthly volumes peaked in May 2021 at $162.8 billion. With a gain of 137.3% over the previous month, January saw the most significant growth. Moreover, November recorded the third highest monthly transaction volume.
This increase in volume reflects the rise in power of decentralised trading platforms compared to their centralised competitors, which are increasingly coming under fire from regulators. As the following graph shows, the dominance of DEXs over CEXs is diminishing month by month:
Monthly volume dominance between DEX and CEX (Source: The Block Report)
One of the reasons for this trend is the crackdown by some countries on cryptocurrencies and thus, centralized exchange platforms. For example, last September, China’s central bank imposed a ban on the Huobi exchange for all user accounts located in mainland China. A wave of investors probably redirected to alternative solutions like DEX.
Focus on key market players
This year, decentralised finance (DeFi) has also seen a power shift among DEX players. While in January 2021, Uniswap v2 was the leader in terms of locked-in value (TVL), it is now Curve Finance that totals the most.
Indeed, the protocol has managed to establish itself in the hearts of users and in the DeFi rankings, taking the top spot ahead of Uniswap and Sushiswap. Curve is currently at $14.7 billion in escrow, 43% higher than its direct competitor.
Top 5 decentralised exchange platforms by total value locked up (Source: DeFi Pulse)
However, Uniswap continues to lead the market in terms of transaction volumes. At its peak in May, Uniswap v2 recorded a monthly volume of $59.2 billion before being eclipsed by its successor. Launched in May 2021, Uniswap v3 dominated the industry by 50% ($47bn) in the last financial year. Combined with v2, Uniswap handles nearly 70% of the volumes that flow through decentralised trading platforms.
Finally, somewhat surprisingly, the report’s data indicates that 13.9% of users choose to use DEX aggregators to conduct their trades. With almost 70% of the market share, the 1inch protocol is the leader.
