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Ethereum in 2023, the State of DEXs and VISA's Web3 Explorations
The Web Three Newsletter | Dec 21, 2022
We curate and summarize three key opinion pieces or industry updates from the world of crypto, weekly
This week, we take a look at:
1️⃣ Vitalik Buterin’s vision for the future of Ethereum and crypto in general, for 2023 and beyond | Episode on Bankless Podcast
2️⃣ How Decentralized Exchanges have evolved over time, and their current state | Blog Post on Hackernoon by Ulrik Lykke
🔮Ethereum in 2023: Vitalik Buterin's Vision for the Future
In a recent podcast, Ryan Sean Adams and Dave Hoffman sat down with Vitalik Buterin, the co-founder of Ethereum, to discuss the future of Ethereum and the cryptocurrency industry. Here is a summary of some of the key discussion points.
Buterin emphasized the importance of 2022 as a pivotal year for technological adoption and the potential for cryptocurrency to make a positive impact on the world.
💻 Overview of Topics Discussed : A range of topics were discussed, including the state of villains in the industry, the proliferation of decentralized autonomous organizations (DAOs) and decentralized finance (DeFi) applications, and Ethereum's potential to solve the problem of decentralized identity on the internet.
🤬 The “State of Villains” in the Crypto Industry : One key point that Buterin made was that villains in the cryptocurrency industry seem to be getting worse with each cycle. He argued that it is important for the industry to address this issue and to establish ethical standards in order to prevent further harm and to build trust with the wider public.
💡 Broad Scope of the Ethereum Platform : Buterin believes that Ethereum, as a platform, has the potential to enable a much wider range of applications and use cases beyond just DeFi and that it is important to emphasize this broader scope.
💸 Simple versus Complicated DeFi Applications : In discussing DeFi, Buterin made the distinction between simple and complicated applications.
Vitalik argued that simple DeFi applications, which are easy to understand and use, are more likely to achieve widespread adoption than complicated ones.
This ties into his overall belief that Ethereum has the potential to solve the problem of decentralized identity on the internet, which is a key barrier to wider adoption of the technology.
🤖 Ethereum's Most Scalable Use Case : Finally, Buterin addressed the question of Ethereum's most scalable use case.
His answer may come as a surprise to some, as he argued that the most scalable use case for Ethereum is not a particular application or use case, but rather the Ethereum Virtual Machine (EVM) itself.
The EVM allows for the creation of a wide range of applications, and Buterin believes that this flexibility will be key to Ethereum's success in the long term.
🌟 ‘Optimism’ for the Future (pun unintended :P) : Overall, the discussion with Buterin was optimistic about the future of Ethereum and the cryptocurrency industry. While acknowledging the challenges and setbacks that have occurred, Buterin remains bullish about the potential for the technology to make a positive impact on the world and to achieve widespread adoption.
📙 Check out the full episode here by Bankless
📈 The Rise of DEXs: How Decentralized Exchanges Have Evolved Over Time
🧐 The Evolution of DEXs : Decentralized exchanges (DEXs) have undergone a significant evolution since the debut of NXT Asset Exchange, one of the pioneer DEXs to launch in 2014. At the time, using decentralized platforms for exchanging tokens was quite complicated and may in hindsight even have been a little ahead of its time.
The perception towards DEXs changed with Uniswap’s Automated Market Making (AMM) genius, in 2018, which would later set the standard for most DEXs that exist today.
🤖 Automated Market Makers : The AMM model was born out of the idea of automating the entire market-making operation of digital asset exchanges. Unlike their centralized order book counterparts, which require users to list a buy and sell order for each token pair respectively; the AMM model leverages a smart contract-powered price algorithm that defines prices mathematically based on the forces of demand and supply for each given pair. In return, liquidity providers are rewarded with a small portion of the transaction fee, which in most cases is paid out in the form of a native token.
📈 Current State of DEXs : Currently, the top 100 DEXs combined have an average of $5 Billion daily trade volume. Also, The Block’s on-chain DEX data, tracking 21 of the most used DEXs, shows an impressive growth trajectory.
From just about $859 Million in trade volume in April of 2020, total DEX volume reached an all-time high of 200+ Billion dollars in trade volume in only 15 months.
As would be evident, the average monthly volumes of DEXs have been on a downtrend this year following the effects of the ongoing bear market.
For instance, monthly trading volumes for Uniswap dropped from $80 billion at the peak of the 2021 bull market - to almost half as much, with the latest figures from November showing an average of $42.6 billion.
🚧 Challenges Facing DEXs : DEXs still have a mile to go before they can catch up with their centralized counterparts in many aspects. They face several challenges to achieving mass adoption, including low liquidity compared to centralized exchanges, scalability and high fees on layer-1 protocols, user experience issues, limited token offerings, and regulatory challenges. However, DEXs are making progress and are likely to continue improving in the future.
📙 Read the full article here on Hackernoon
💳 Enhancing Payment Flexibility using Web3 : Visa's Explorations
Catherine Gu from Visa shares how Visa is exploring the use of Account Abstraction (AA) to enhance the user experience on a self-custodial wallet, among other use cases
💡 Visa's Engagement with the Crypto Ecosystem : Visa has been closely following the development of the cryptocurrency ecosystem and is looking to actively contribute to its technical development.
🔐 Focus on Key Areas for Payments in Web3 : In order to do so, Visa is focusing on web3 infrastructure and blockchain protocols with a focus on areas important for payments, such as security, scalability, interoperability, and privacy. As part of this effort, Visa is sharing research, engaging with clients, partners, and developers, and focusing on real-world use cases for payments with a good user experience.
🤔 The Concept of Account Abstraction (AA) : As part of this effort, Visa recently explored the concept of Account Abstraction and how it can be used to set up autopayments on a self-custodial wallet.
Account Abstraction (AA) is a concept first proposed by Vitalik Buterin in 2015 and has the potential to significantly enhance the user experience on a digital wallet by providing more flexibility in how it functions.
🧑💻 Testing & Learning Experience : Visa tested this concept by building an autopayment application using StarkNet, a Layer 2 network that supports AA, and the Argent wallet. The team deployed its smart contracts and tested the transactions on a private chain. This was a great learning experience for the team, who also had the opportunity to learn more about the StarkNet protocol and Cairo.
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