The CEX Your Mama Warned You About
“I once knew a hippopotamus, that was ethically non-monogamous.”
- Hungry Hippo, by Pan Amsterdam
The CEX Your Mama Warned You About
Nobody ever said we don’t have enough centralized exchanges, yet new ones continue to launch and build what was already on the market.
There are, of course, ways to offer something distinctive, whether it’s localized fiat on/off ramps or specific listings and perps that aren’t available elsewhere. But I’d argue that’s not enough for a CEX that ranks in the bottom 500 to climb the ranks and get into the top 100.
The real crypto action, however, is not on the trading floor. It happens on-chain, in the depths of proper DeFi. And CEXs are recognizing that’s where the real potential lies.
Chief Strategy Officer at Binance summed it up in a 2022 webinar by saying Binance - the number 1 exchange in the world - only had a future if it were to become a full DEX within the next 10 years.
The old CEX versus DEX debate again?
No. Forking into a full DEX isn’t necessarily the only option for CEXs, and there are still downsides to trading on a DEX.
Solana’s poor performance recently, as the chain was used on a new scale to mint and mine sloth dribble, resulted in many failed transactions. Consequently, on DEXs, more than a few stop losses did not trigger.
You can check Zeta Market’s TG chat if you want to see how people react to the liquidations that followed, and also how average users don’t understand that it’s a problem at the chain level, not the DEX itself.
Zeta Markets has announced it’s building its own Layer 2 to make the problem go away, which is great but also kind of telling of how this space will continue to evolve.
Many solutions in DeFi require new solutions to make them work better, which simply adds to one of the biggest problems on-chain crypto faces: it’s overly complex and just too hard for most people.
Even for people already dwelling on-chain.Go to a chain you’ve never explored and see how you feel about creeping in the dark, holding a bag of coins, looking for the light switch.
See my crypto diary entry:
Captain’s log, chaindate 42069.21:
All I wanted to do was check out the project hallways over at Cronos and kick the tires a bit.
I couldn’t easily find a Solana to Cronos bridge, but I did see I could do an IBC transfer.
So, I swept some OSMO dust, swapped it for CRO, sent it to the Cronos POS via IBC transfer, then bridged that into the Cronos chain because that’s where you interact with the dApps; the POS chain is only for direct staking.
None of that feels great. Once you’re all set up, it’s fine, but those first few steps are where we lose most people.
That’s how we end up with ghost cities: fine-looking places where nobody lives.
“Build it and they will come” only has a chance of working if there is a way for people to come over, which is exactly what CEXs have tuned into.
CEXs are cooking on-chain
There are different ways a CEX can provide access to DeFi.
Coinbase, Crypto[.]com, and OKX all have their own chains complete with DeFi wallets. The Coinbase wallet works across chains like Base, Polygon, Avalanche, and BNB.
The OKX Web3 wallet is more like an in-app interface for registered users to interact with whitelisted DeFi applications. OKX wallet users do not own their private keys.
Bitget has ‘incubated’ MorphL2, another Layer 2 for Ethereum. How many Layer 2s does it take to screw in a transaction?
Other exchanges like BIT Exchange provide intermediary access to crypto-native features, like the Merlin Chain staking product or EigenLayer Points Market, which make it possible for users to participate in the respective airdrops without having to creep on-chain.
Overall, the trend is that CEXs are providing some form of easy access to some elements of the DeFi economy. Familiar interfaces in new places can make all the difference.
And I know, this is exactly what your on-chain mama warned you about, anon.
It is not aligned with the self-custody gospel of The Chain, but that simply isn’t for everyone.
The BTC ETF is also not true to the values of Bitty, but it does result in real coins being bought by someone. In the same heathen way, more on-chain connectivity offered by CEXs will juice the TVL and overall activity on dApps one way or another.
It doesn’t have to be grand or complex, and that’s exactly the point.
Give me sauces
Let’s say Zeta Markets, a DEX on Solana, works with the centralized Zamboni Exchange to offer users a simple way to interact:
- Zamboni users commit funds to a yield product, which is connected to an insurance fund on Zeta Markets.
- The Zamboni Exchange performs the on-chain activity at regular intervals on behalf of their users.
- Zamboni users earn from trading fees on Zeta Markets.
That’s it. Our fully KYC’d registered users don’t have to fumble with their keys or figure out why transactions using Triton are more reliable than Helius right now cos Solana manlets are minting another sloth on a bike.
Meanwhile, Zamboni offers something to keep their users active on their own platform, and Zeta Markets benefits from a cashed-up insurance fund as a stronger backstop to maintain solvency.
The frenemy era was cute, but it’s probably time for the centralized and decentralized worlds of crypto to collide.
As CEXs continue to build their highways towards supposed ghost towns, chains and/or dApps that find ways to collaborate and integrate will have a huge advantage.
Busloads of tourists could stop by your shop if you put up a sign.
Meanwhile...
Pioneering the EigenLayer Points Market
The EigenLayer Points Program was launched to reward early adoption activities on the EigenLayer platform such as restaking liquid staking tokens (LSTs) within the EigenLayer system, depending on the quantity and duration of tokens restaked.
BIT Exchange is the first centralized exchange to open a market for buying EigenLayer Points ahead of the token generation event.
Our COO in Conversation with Hackernoon
Check out the insightful interview with our COO LAN, where he discusses how we’re pioneering the EigenLayer Points Market and the future plans for BIT Exchange.
The Magic of Liquid Staking Tokens (LSTs)
Staking usually means locking up some tokens to help a network run smoothly, like validating transactions or keeping things fair with Proof-of-Stake.
But there's been a problem: once you stake your tokens, you can't really use them for anything else.
That's where Liquid Staking Tokens (LST) come in.
Sweet Dreams Are Made of Memes
On the fringes of the internet, where memes reign supreme and communities trade inside jokes, a new world was created: Memeland.
Born from the legacy of 9GAG, a memepool in the realm of internet humor, Memeland is an adventure into the unexplored waters of Web 3.0. Or as they describe it themselves, a journey into the ‘Broken Seas’ where the ‘Potatoz’ and ‘Captainz’ roam.
At its core lies $MEME, a digital currency that fuels this new world, brimming with creativity, collaboration, and of course, dark humor.
Most Memorable Meme
