Could this crypto be the underdog of 2023?

Crypto has come a long way from its humble beginnings. What was once a market with only a few options for investors has transformed into a diverse ecosystem full of not only cryptocurrencies, but also companies creating business models that leverage these digital assets.

Some of the most lucrative companies in the crypto industry are exchanges. Known as centralized exchanges, these companies provide investors with an easy-to-use platform to buy and sell cryptocurrencies and take a cut of each transaction to generate profits.

Conversely, there are also decentralized exchanges that are not run by any company. Instead, they use technology known as smart contracts, which facilitate trades without the need for a company.

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The big differences

After the year that was 2022, a year in which several high-profile centralized exchanges collapsed, it seems that more and more people are going to realize that decentralized exchanges are a more viable option for several reasons.

First, they are more secure than centralized exchanges because they do not hold users’ funds. In a centralized exchange, hackers can target the exchange to steal users’ assets. Instead of having a centralized exchange that holds user funds, decentralized exchanges allow users to hold their assets in their own wallets and trade directly with each other.

Second, decentralized exchanges offer more privacy than centralized exchanges because they do not require users to provide personal information. In a centralized exchange, users usually have to provide personal information such as name, address and social security number to create an account. This information can be vulnerable to data breaches, identity theft and other forms of fraud. Decentralized exchanges, on the other hand, do not require personal information, so users can maintain their privacy.

Finally, decentralized exchanges are more transparent than centralized exchanges because they are built on a blockchain network. This means that all trades are recorded in a public ledger, which can be audited by anyone. Centralized exchanges, on the other hand, are not transparent because they can manipulate prices or withhold information from users. This lack of transparency can lead to market fraud and insider trading.

An opportunity at hand

So what does all this mean for investors? Well, there is actually a potentially profitable opportunity at hand – investing in the world’s most popular decentralized exchange, Uniswap (UNI 2.18%).

Uniswap has its own token, Uni, and has become one of the most widely used ecosystems that allows users to not only buy and sell crypto, but also bet, lend, borrow and complete many other functions related to decentralized finance (DeFi).

As people become more aware of the benefits that come with using decentralized exchanges as opposed to the more common centralized ones, Uniswap and its token are poised to take advantage.

In fact, it appears that this realization is already well under way. In March, Uniswap surpassed one of the most popular exchanges, Coinbase Global, with a margin of more than 40%. Volume statistics show that Uniswap settled trades worth more than $70 billion while Coinbase entered in just under $50 billion. This is now the second month in a row that Uniswap has had more volume than Coinbase.

Furthermore, this trend has a legitimate chance to grow even more as centralized exchanges face increased pressure from lawmakers seeking to regulate the cryptocurrency market. While regulators may be able to target centralized exchanges and companies, they cannot target decentralized protocols like Uniswap.

Should regulation come, which seems more likely by the day, Uniswap could be a real beneficiary. With the price still well off its all time high, investing at today’s prices could be a wise decision as the viability of decentralized exchanges becomes more apparent.