Dex Volume Soars Amid Crypto Market Rout

Also Set Protocol adding social trading, and first DeFi options are live


Hello defiers! Here’s what’s going on in decentralized finance:

  • Decentralized exchange volume is soaring
  • Set Protocol plans to add social trading
  • First DeFi options are here

Dex Volume Soars Amid Market Rout

Decentralized exchange volume more than doubled last week from the previous seven days, far outpacing centralized exchanges.

DEX volume jumped 163 percent to more than $80 million in the week starting Nov. 18, the biggest increase since at least the start of September, according to Dune Analytics. This compares with week-over-week volume increasing by as much as 12 percent for Bitmex and less than 1 percent for Kraken and Coinbase.


Image source: Dune Analytics

Uniswap Exchange is the leading Dex by number of trades, while Kyber Network has marginally higher volume at $24.6 million, versus $24.5 million for Uniswap, according to Dune Analytics. Those numbers aren’t straightforward though. Kyber uses other Dexes, including Uniswap and MakerDAO’s Oasis Dex, to execute some of its trades, which means part of its volume is duplicated, Dune Analytics said.

The jump may be due to the selloff in cryptocurrency markets. Sharp market movements either way usually spur an increase in trading from people cutting losses or buying the dip. In the case of DeFi, which is becoming an important source of Dex volume, traders had to top off their collateral or took out new loans to speculate.

While not all Dexes are structured in the same way, their goal is to cut intermediaries so that users are trading directly with each other or with a liquidity pool, without the need to trust third parties with their funds, data or to match their trades in a centralized order book. Because there’s no entity managing users’ funds and trades, most of these platforms don’t require KYC procedures.

[Read my interview with 0x cofounder Will Warren for more on Dexes]

They offer a streamlined experience, where if you already have crypto, you can start trading with a click. Dexes’ volume data is also more transparent, unlike centralized exchanges known to inflate numbers. Most importantly, users are in control of their own funds, while Cexes have lost hundreds of millions in hacks.

But even if Dex use is increasing, they’re still just a small fraction of centralized exchanges volume. The +$80 million traded in the past week on six different Dexes tracked by Dune compared with $8.2 billion traded just on Binance, according to Nomics, which tracks the data.

Centralized exchanges offer more functionality than most Dexes, for example with limit orders and the ability to buy crypto with credit cards. Dexes also used to be harder to use and slower. But they’re improving on all these aspects, to a point where functionality is coming close to Cexes, Layer 2 solutions are improving speed, and user interface in some cases is even better than on centralized exchanges. Maybe the hardest feature to bridge between the two is the fiat-to-crypto gateway.

Just like the rest of DeFi, Dexes still have a ways to go before overtaking their centralized counterparts, but the trend is moving in their favor.

Set Protocol Plans to Add Social Trading Next Year

Soon Set Protocol users will be able to follow successful traders and automatically copy their moves.

Set Social Trading, to be launched early 2020, enables traders to create their own trading pools where they can trade ETH, WBTC, USDC, DAI, cUSDC, and cDAI. Users can then join these trading pools, copying every single action the trader, or trading algorithm, enacts.

A trader leaderboard will help others decide who to follow, and traders get paid a fee for managing the Set.

Set Protocol currently allows traders to automatically rebalance their portfolio according to a trading strategy, for example, buying and selling ETH against USDC according to ether’s 20-day moving average, among others.

Probably the most well-known social trading platform is eToro. I wasn’t able to find much literature on how successful these models are. One paper, published July 2019, found “signal providers in general neither outperform mutual funds nor the market.”

There’s Now Fledgling DeFi Options Market

Options to protect against Dai volatility are now live.

Ohmydai created tokenized options to protect against Dai losing its peg. They took Convexity Protocol’s paper drafted last week (which I covered here), and made the tool themselves.

Tokenized options are called ohtokens and are sold for USDC. Buyers of the tokens have the option of selling Dai in exchange for USDC at 1 Dai = 1 USDC, in the future. Sellers mint ohtokens by putting up collateral and have the obligation to buy them back at the strike price (1 USDC) if buyers exercise their option. Read this post for more details.

There are many quirks to figure out, as for now only USDC/DAI is supported, and sellers can’t undo their postition before the expiration date ince the tokens are minted. But it’s a great start. A mature and robust options market will make risky DeFi more secure.

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