The decentralized finance (DeFi) landscape has undergone a remarkable transformation since its inception, with countless nifty projects, scalable Layer-2 blockchains, and seesawing tokens spinning off the production line.
From madcap memecoins to Ordinals, AMMs to DePINs, there’s never a dull moment in the parallel financial universe that is DeFi. Through it all, decentralized exchanges (DEXs) have remained the lifeblood of the ecosystem, enabling parties to trustlessly trade to their heart’s content. Although they’ve remained a constant, though, DEXs have themselves evolved from the early days. Indeed, the best of them are now considered viable alternatives to their centralized counterparts…
The Early Days of DEXs
The first automated market makers (AMMs) sprung up on Ethereum and introduced the concept of permissionless trading, effectively making them totems that were emblematic of DeFi’s raison d’etre. In a way, there’s no DeFi without AMMs and DEXs – just as there’s no DeFi without Bitcoin.
Although heralded for breaking new ground, early AMMs like Bancor and UniSwap had limitations that only became apparent over time. For all their benefits, negatives inevitably appeared like cracks in masonry, eliding the differences between DEXs (trustless, automated, private) and CEXs, the latter of which enjoyed a healthy advantage due to their advanced order types, superior price discovery, and depth of liquidity.
Advertised as alternatives to CEXs, DEXs won hearts and minds in tremendous numbers during DeFi Summer 1.0. Yet they couldn’t compete with the slick order matching engines, advanced risk management tools, and high-frequency trading capabilities of big beasts like Coinbase and Binance.
As that wasn’t enough, the deep liquidity pools and robust investor protections offered by leading exchanges pressed home the advantage. There was a time and a place for DEXs, sure, but professional traders knew where their bread was buttered. Serial hack attacks carried out on DEX protocols only underscored this point.
In a sense, the trend has continued. Figures from July 2024 show that trading volume on DEXs has increased by 51% since last June; yet the volume on CEXs jumped by 119% over the same period. By and large, CEXs continue to command more trust. Nevertheless, many of the advantages CEXs originally held over decentralized platforms no longer apply.
Orbs: DeFi Spirit, CeFi Execution
So what happened to wipe out the inherent advantage centralized trading platforms had over DEXs? In short, the emergence of solutions that turbocharged the functionality of decentralized protocols. Solutions like Layer-3 blockchain Orbs, which has been augmenting DEXs and other protocols with TradFi-level execution capabilities for the last few years.
Obs refers to its process as “optimizing on-chain trading,” equipping clients with features like aggregated liquidity, advanced trading orders, and decentralized derivatives. In short, it’s DeFi trading but not as anyone knows it. And it’s taking the fight to CeFi in a big way.
One of the aspects that sets Orbs apart is its ability to enhance both EVM and non-EVM smart contracts without requiring liquidity to be bridged to a new network. This unique architecture serves as a decentralized backend, effectively bringing institutional-grade execution to the realm of DeFi.
Among other perks, Orbs lets traders place sophisticated limit and stop-loss orders, enjoy smart order routing and splitting, and execute time-weighted average price (TWAP) orders. Moreover, its ability to aggregate liquidity across multiple DEXs has dramatically reduced slippage, putting more profit in traders’ pockets.
With deep cross-chain liquidity, strong incentive structures for liquidity providers, and improved price discovery thanks to the integration of off-chain data, it’s little wonder Orbs has succeeded in turning many traders’ heads. Particularly since it has also incorporated TradFi-style risk management systems, ensuring regulatory compliance without compromising on its decentralized ethos.
In the last few years, myriad DeFi projects have integrated Orbs including Thena, QuickSwap, PancakeSwap, IntentX, and Symmio, making it the most widely-integrated L3 solution for DeFi trading on the market.
Looking Ahead
Orbs didn’t emerge in a vacuum: it came about as a response to the challenges facing DeFi, from substandard UX and siloed liquidity to regulatory uncertainty and unsafe interoperable bridges.
As the web3 ecosystem matures, we’re likely to see similar solutions come online with the promise of making on-chain trading more sophisticated, safe, efficient, and accessible. Gradually, the onus is shifting to CEXs who must innovate to maintain their edge over the competition and onboard the next wave of crypto traders.
