DEXs must shift their focus toward revenue generation

Disclosure: The views and opinions expressed here are solely those of the author and do not necessarily represent the views and opinions of crypto.news editorial.

“Disintermediation” is a buzzword that has been around the defi ecosystem for a while now. This refers to the art of cutting out the middleman to allow ordinary investors to connect directly to decentralized finance protocols and provide access to a variety of financial services without relying on traditional intermediaries.

In this space, the user is the master of their own digital space and their assets are secured in their personal wallet, giving them power over their financial journey. Decentralized exchanges, or DEXs, have emerged as a platform that promises to reshape traditional finance by incorporating the principles of decentralized governance, transparency, and financial inclusion by offering users the ability to trade without the need for financial institutions.

But despite their potential, DEX developers have had to consider unique revenue sources. The decentralized nature of DEXs raises issues with the supply of liquidity, which is essential for any exchange to operate smoothly and allow users to buy and sell assets without significant price drifts. However, attracting liquidity providers to the DEX requires incentives, which can be challenging, especially if centralized mechanisms are disabled.

On traditional exchanges, market makers are often incentivized through a variety of means, such as discounts, trading incentives, and privileged access to certain trading pairs. Definitively replicating these mechanisms while preserving the principles of decentralization and autonomy poses a daunting challenge.

Additionally, security risk, hacks and smart contract vulnerabilities in the Defi sector have led to a decrease in trust and confidence among some users and investors. Security breaches not only cause financial losses but also damage the DEX’s reputation. Reputation is everything in Defi, and restoring trust while mitigating risks is essential for growth and stability.

The Defi space is also very competitive; There are constantly new projects and platforms entering the market. This means DEX developers must work extra hard to attract users and liquidity while differentiating themselves from competitors. This is easier said than done, especially given the learning curve that hinders building community and ultimately turning a profit. It is difficult for a DEX to make money if it is constantly dependent on external liquidity.

Simply put, the old DEX model doesn’t seem to work anymore.

However, some DEXs and automated market makers are trying to crack the code by changing their focus. Unlike traditional DEXs that attempt to incentivize liquidity provisions without resorting to centralized mechanisms, Astrovault directly profits from liquidity in an honest and transparent manner. Astrovault aligns its business model with the core activities of the exchange, ensuring that its success is intertwined with the liquidity and activity on the platform. As investors participate in trading activities, Astrovault leverages its liquidity pool, providing a revenue stream without sacrificing decentralization.

DEX platforms have a tendency to operate in a non-transparent manner and prioritize internal profit motives, but a transparent revenue model will ensure that their users can trust their platform and understand how it generates revenue.

A DEX that monetizes its own liquidity is a rare feat, but it shows how community building can strengthen its sustainability. This relationship fuels a cycle in which the success of the platform translates into tangible benefits for users, leading to greater adoption. As Defi continues to mature, the DEX’s ability to monetize its operations will play a role in shaping the future of finance and opportunities in decentralized financial systems.