The growth of DeFi is already pushing CEXs to do better

As the CEO of a centralized cryptocurrency exchange (CEX), people often ask me if I'm worried about the rise of DeFi and whether it will challenge our core business. The explosion of DeFi onto the scene and the gargantuan development strides it has made are certainly hard to ignore - but neither should they be. In fact, the fierce competition (and some rogue practices) that we are seeing in DeFi are already pushing CEXs to do better.

The Cut-Throat DeFi Space

Yield farming or liquidity mining has taken center-stage among retail investors lately mainly for the high-risk, high reward. What's arguably more astounding, however, is the ferocity of the competition and the speed with which projects can bootstrap code, fork liquidity, and grow from zero to over a billion dollars almost overnight.

Clearly, this practice is unsustainable and plenty of people will find themselves buying high and chasing the price all the way down to zero with tokens locked into a protocol that's an unaudited catastrophe just waiting to happen. But it does not detract from the mounting pressure on DeFi protocols to iterate constantly or be left in the dust.

And it's already pushing CEXs to rethink many of their practices not only to ensure that its customers get a slice of the action and can speculate on some of the latest promising DeFi projects; but also to think about how their own products are developed. And to contemplate the very real prospect that in order not to get run over by DeFi, the best way forward is to join forces with it.

CEXs are having to ask the tough questions about how they can best support and participate in this new evolution of crypto and the promise of DeFi while continuing to remain relevant, offering safer solutions and alternatives; collectively growing the blockchain space rather than infighting amongst ourselves.

The battle of the CEXs (excuse the pun) has long-departed from its starting point and evolved to public chains, oracles, and products that allow users to make a passive income rather than just spot or margin trade.

One-Stop Mining, Non-Stop Innovation

All leading CEXs are listing hot new DeFi tokens for their users. Some, like ours, are even offering advanced trading tools that allow users to hedge their risks and maximize their profits.

We're also seeing the expansion of initiatives that allow for one-stop mining, an easier way for users to take advantage of the benefits of liquidity mining through a more familiar UI and a safer environment in which they can stake and unstake at any time with ultra-high yield, no gas fees, and rewards calculated daily.

CEXs are also developing C2C lending programs and offering savings capabilities that allow users to earn interest on their favorite tokens or pledge their crypto as collateral and take out loans, working peer to peer yet through centralized exchanges that they already use and trust.

Of course, none of these types of investment strategies are completely free from risk. We're talking about crypto assets of the most volatile kind. But, it is certainly interesting to see how leading CEXs are reacting to the rise of DeFi and the non-stop innovations coming out.

Beyond Short-Term Gains and Liquidity Mining

Of course, all this noise and growing craze for governance tokens (many named after food) is really just a distraction. Anyone jumping on the DeFi train expecting to make rocketship gains is likely heading for a fall. As we have seen so blatantly from several projects recently without pointing fingers, the space is still nascent, prone to technical glitches, human error, greed, and emotional overreactions from unsophisticated investors.

Yet, none of this should detract from the real promise of DeFi. Let's not forget that while the traditional financial system struggles to keep its fiat currencies afloat after rounds and rounds of unchecked QE, an alternative is fast-emerging.

Decentralized finance allows people to actually make a decent rate on their savings rather than the near-negative yield at a bank. It gives credit to those underserviced or even refused by traditional banks. It provides a real potential way of reaching the 2 billion unbanked adults around the world, allowing them to participate in their local economies and live better lives... and the chance to bring real-world assets onto the blockchain, changing the way that businesses (and the world) work.

For the first time in history, we have a real shot at providing financial services to all and building a solid sustainable supplement to the current system that is inclusive and forces legacy banks to improve. We're already seeing changes being made as incumbents are becoming more accountable. And now we're seeing CEXs striving to be better which can only provide a win-win situation for all the players in this space.