Nathan Cha, who leads marketing at dYdX, shares his views on where he sees the volume of decentralized exchanges headed in the future.

Since the FTX incident, CEXs have struggled under mounting controversies and faced relentless scrutiny from regulators. Just last week, the Securities and Exchange Commission (SEC) intensified this scrutiny by filing lawsuits against entities accused of offering unregistered securities. Binance and Coinbase As regulations surrounding cryptocurrencies grow more complex and uncertain, CEXs are under increasing pressure to comply with various laws, which differ across regions. This has led to challenging compliance issues, operational constraints, and possible limitations on user access, prompting many to seek alternatives in decentralized exchanges (DEXs). 

In the span of just a few months, the weekly trading volume on DEXs skyrocketed from under 20 billion in June 2022 to surpassing 40 billion in March 2023. This explosive growth signals that more traders are shifting towards DEXs for cryptocurrency trading, mainly due to their capacity to operate without permissions, thereby avoiding some regulatory obstacles that CEXs face.

According to data on Dune Analytics DEXs provide enhanced privacy and allow pseudonymous trading, giving users a greater sense of control over their personal data compared to CEXs. Nonetheless, liquidity issues can arise, as DEXs typically exhibit lower trading volumes, which could lead to less favorable pricing and longer transaction times.

In light of the latest shifts in the crypto landscape, we engaged Nathan Cha, the marketing lead at dYdX, to discuss accessibility enhancements for DEX and his belief that volumes in decentralized trading will outpace those of centralized platforms. 

Can you share a bit about your professional background and your current role at dYdX?

I'm Nathan Cha, but friends and colleagues usually call me Nate. Before dYdX, I collaborated with a diverse range of clients—from consumer packaged goods to television—helping them design ad strategies, evaluate brand performance, and align their marketing initiatives. I became part of the dYdX team in 2022 to establish a comprehensive marketing framework for the protocol.

What first drew your interest to the crypto world, and when did you first come across it? Social Media I was introduced to Bitcoin back in college during the early 2010s and initially viewed it as an alternative investment outside of traditional stocks. However, it wasn't until I noticed the remarkable growth of the entire sector in the late 2010s that I began to delve deeper. As I explored the fast-paced and versatile potential of web3 and blockchain, I became captivated. The DeFi sector particularly fascinated me due to its groundbreaking technology that enables peer-to-peer transactions.

What distinguishes dYdX from other decentralized derivatives exchanges, and how does it help foster ongoing DEX growth?

dYdX has developed a dedicated and engaged community of users, consisting of both retail and institutional investors. Many DEXs face challenges related to product experience and liquidity, often falling short compared to their centralized counterparts.

We take pride in the robust liquidity we offer along with the DeFi advantages that are unavailable through centralized exchanges. Being non-custodial and fully transparent/auditable means that users can trust us without worrying about counterparty risks or the need to provide proof of reserves. Auditing our operations in real-time while retaining ownership of your traded assets is effortless. 

We firmly believe that decentralization is essential for the future of finance. Following the unsettling black swan events of the last year, we are convinced that empowering users to minimize reliance on centralized entities is the only ethical path forward. We should lean on the strength of the code instead.

The crypto landscape has seen considerable volatility and market cycles. How do you view DEX platforms like dYdX influencing the overall stability and maturity of the crypto market, especially regarding trading liquidity and price discovery?

DEX platforms should prioritize self-custody. One of the issues we identified last year was the rapid spread of risks following various protocol and exchange failures. DEX platforms empower users to retain control of their assets, ensuring that even during significant market fluctuations, users do not lose custody of their funds. In contrast, funds on centralized exchanges tend to vanish unexpectedly. This aspect is crucial for the functionality of the crypto market and for maintaining trust within the ecosystem.

Regarding liquidity, the crypto market behaves uniquely; institutional players and market makers often follow where retail activity aligns. Thus, it is crucial for DEXs to draw more retail engagement by providing offerings that are appealing to traders who seek the functionalities they need to trade effectively. With the shift to v4, dYdX will enhance throughput and scalability to support a broader range of trading markets while increasing transparency by moving the order book on-chain.

Despite advancements, many still view DEX platforms as more complicated than centralized exchanges. How is dYdX addressing this usability challenge to make DEX trading more accessible to a wider audience, particularly beginners?

Historically, CEXs have served as a more inviting entry point for retail traders stepping into the crypto world. On the other hand, DEXs may seem daunting due to the need for non-custodial wallets, safeguarding private keys, and the education required to navigate these platforms.

Nevertheless, DEXs also broaden accessibility and uphold privacy, as they do not demand KYC compliance from retail users. We've integrated fiat on-ramps that simplify asset deposits for newcomers who might not yet own cryptocurrency.

That said, dYdX specializes in perpetual trading (a category of derivatives), which tends to attract a more sophisticated audience. Realistically, a new investor interested in Bitcoin or Ethereum might prefer to simply purchase spot assets for basic exposure rather than engage with the dYdX platform. Thus, we focus on serving 'pro-retail' traders and institutions seeking advanced trading capabilities, a diversified market selection, and an exceptional user experience. This approach is key to making DEX trading more inclusive.

Centralized exchanges (CEX) have historically dominated the cryptocurrency trading environment. What is your perspective on the long-term rivalry and potential collaboration between DEX platforms like dYdX and CEXs, along with the unique advantages DEXs might offer to entice traders away from centralized options?

Our CEO, Antonio Juliano, often mentions his belief that it may take about 5 to 10 years for DEXs to achieve trading volumes comparable to those of centralized exchanges. We're still in the early stages of educating users and developing robust products. While technological quality has surged in recent years and retail awareness of DeFi values is climbing, we have yet to reach mass adoption.

I envision a future where both CEXs and DEXs coexist; some individuals may prefer not to manage private keys or navigate personal wallets when trading or investing. Nonetheless, I firmly believe DEX volumes will eventually surpass those of CEXs. 

The self-custody of assets and the transparency inherent in decentralized finance can never be matched by CEXs or other centralized entities since, by their very nature, they conceal too much information from external parties and their users. 

We've seen this narrative repeated time and again—an exchange collapses, and user funds seemingly disappear overnight, but often, fraudulent activities or mismanagement of funds had been occurring behind closed doors for extended periods. Even if dYdX were to cease operations tomorrow, user funds would remain secure because we never take custody of users' funds. 

Securing user trust and ensuring safety is paramount for any financial service. Could you explain the security protocols that dYdX has in place?

At dYdX, we're extremely confident in the security of the code and products we've developed. Our platform has proven reliable, managing an average trading volume of a billion per day without any significant hacks or incidents.

Furthermore, our commitment to transparency is evident, as anyone can audit dYdX's smart contract via Etherscan anytime. With the launch of version 4, we will also be open-sourcing our protocol, allowing anyone to inspect our technology stack and product. If individuals wish to build on our open-source software or conduct thorough assessments, they will find it easy to do so.

Nathan Cha, the Marketing Lead at dYdX, shares his thoughts on the future potential trading volume of decentralized exchanges in a piece featured on Metaverse Post.

Ever since the downfall of FTX last year, centralized cryptocurrency exchanges (CEX) have found themselves embroiled in scandals and struggling to navigate one regulatory challenge after another.

Nathan Cha, who leads marketing at dYdX, offers his perspective on what the future holds for trading volumes in decentralized exchanges.

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Published on June 16, 2023 at 11:00 AM and updated on June 14, 2024, at 10:33 AM. blog post To enhance your experience in your native language, we occasionally use an auto-translation tool. Please be aware that the accuracy of auto-translation may vary, so proceed with caution.

In light of recent occurrences in the cryptocurrency domain, we spoke with Nathan Cha, the marketing lead at dYdX, to understand how DEXs can enhance accessibility and his expectations for DEX trading volumes eventually surpassing those of CEXs.

Following the FTX incident, CEXs have faced numerous controversies and mounting regulations. Just last week, the SEC intensified its scrutiny by filing lawsuits against known entities.

These lawsuits accuse certain parties of promoting unregistered securities.

Read more:

• Antonio Juliano, Founder of dYdX
• As the cryptocurrency regulatory landscape grows ever more intricate and uncertain, CEXs find themselves bound by stringent regulations due to their centralized nature, which often varies significantly across different nations. This situation has led to compliance difficulties, operational constraints, and possible limitations on user access, pushing many traders toward decentralized exchanges (DEXs).
• In fact, the weekly trading volume on DEXs skyrocketed from under $20 billion in June 2022 to more than $40 billion in March 2023. This remarkable uptick indicates an increasing preference among users for DEXs when it comes to cryptocurrency trading. Their decentralized aspect allows them to often navigate regulatory hurdles more seamlessly compared to their centralized counterparts.