Why decentralized exchanges are thriving today

Decentralized exchanges (DEXs) are redefining the future of trading by putting control, privacy, and trust back into the hands of users. 

In the world of cryptocurrency, two main types of exchanges dominate: centralized and decentralized. Centralized exchanges (CEXs) are regulated companies that facilitate the buying, selling, and trading of assets. In contrast, DEXs are peer-to-peer platforms where traders interact directly without intermediaries. While CEXs require users to create accounts and share personal information, DEXs only need a crypto wallet and assets—ensuring anonymity.

DEXs have been soaring. In fact, the Block Research revealed that in November 2024, the trading volume of DEXs reached $300 billion, going way beyond its historical $260 billion high in May 2021.

The Block Research shows that the trading volume of decentralized exchanges (DEX) exceeded $300 billion in November 2024, exceeding the historical high of $260 billion set in May 2021. DEX's share of overall cryptocurrency trading volume has risen to 11% from 9.3% at the…

— Wu Blockchain (@WuBlockchain) December 21, 2024

Crypto exchange OKX also released its The State of DEXs 2025 report to builders and developers. It shared, “While OKX started as a Centralized Exchange (CEX), we believe the future of crypto is decentralized and self-custody.”

OKX explained that DEXs encapsulate the decentralized, borderless, and permissionless principles that lured several people into the world of Web3 in the first place. “They provide a framework where anyone can participate without intermediaries or gatekeepers, fostering a true market of peers,” it noted.  

Solana leads the market

Most notably, Solana accounted for over 50% of the total volume of DEXs. “Unsurprisingly, at the time of this report, about 60% of this volume stems from pumpdotfun activity, meaning this single platform is generating more DEX traffic on Solana than any other blockchain sees in total,” OKX noted. 

Pump.fun is a Solana-based memecoin generator that allows anyone to create a token in a matter of minutes. Several headline-hitters of 2024, such as PNUT, were created through pump.fun. 

However, Solana's dominance in the DEX landscape goes beyond that. “By almost all measures of blockchain adoption, Solana blows every other chain out of the park. Network transaction fees generated, transaction count, active wallet addresses, DEX active users - Solana is truly the retail chain,” it noted. 

Despite these achievements, Solana struggles with liquidity, a crucial factor in decentralized finance (DeFi). Liquidity pools (LPs) aggregate funds into smart contracts to enable seamless transactions. Higher liquidity in these pools leads to more efficient DEX trading. Here, Ethereum still holds a significant edge.

Ethereum’s upgrade

As for Ethereum, it made a big change by shifting from Proof-of-Work (PoW) to Proof-of-Stake (PoS). PoW, like what Bitcoin uses, relies on mining, where computers solve tough math problems to validate transactions and create new coins. On the other hand, PoS involves staking, where users lock up their cryptocurrency, similar to a time deposit, to help secure the network. 

This change has gravely impacted DEXs. It made Ethereum faster and cheaper for using apps. It also allowed Layer-2 solutions—technologies designed to improve the efficiency and performance of other blockchains like Ethereum—to process transactions at lower costs. As a result, DEXs built on Layer-2 solutions became more affordable to use. 

OKX noted, “In the blockchain space, Ethereum has maintained one of the deepest liquidity for DeFi applications. This stands to reason considering Ethereum is one of the most decentralized blockchains with high security.” However, transaction fees on Ethereum have been quite high, which makes it infeasible for transfers that are low-value and high-frequency. This has also impedesld DEXs. 

Nevertheless, Ethereum still stands tall when it comes to DEX volumes. In fact, according to a Builder Energy report by a16z, 20.8% of builders still want to develop apps on Ethereum. “With the proliferation of L2s and innovation of DEX primitives, it suffices to say that Ethereum will not go down without a fight,” OKX stated. Not to mention, the blockchain’s transition to Ethereum 2.0 has allowed it to become truly scalable.

DEXs are rising and transforming crypto trading, with the rise of platforms like Solana's pump.fun and Ethereum's transition to PoS. Though challenges may persist, the growing adoption and innovation of the DEX ecosystem show a strong future for the world of decentralized finance.