Thanks to Robinhood halting the trading of Gamestop, a lot of angry retail investors will soon be discovering the freedom of Decentralized Finance (DeFi), a world where trading cannot be stopped by a biased central authority.
Currently the leader in the decentralized exchange (DEX) race is Ethereum's Uniswap, with over 50 billion of volume in 2020. But there are several other DEXes sprouting up on other public blockchains, each of which have talented developers who are working hard to capture some of this volume. For example, we have Pancakeswap on Binance Smart Chain, Serum on Solana, Newdex on EOS, Vexchange on VeChain, and the list goes on...
In addition to internal DEXes, we also have teams working on cross-chain decentralized exchanges, such as Ren and Thorchain. These DEXes will allow people to trade tokens between any two public blockchains (say, Bitcoin to Ethereum or vice versa) without the need for a centralized exchange such as Coinbase or Binance.
Although Uniswap is currently in the lead, it has some serious issues. A major one being the insanely high fees. It can cost over $20USD in gas fees to make even a small trade. As the value of Ethereum continues to increase, more and more traders will get priced out of the market, and will likely seek out alternative DEXes where they can trade at more reasonable rates. Yes, Ethereum 2.0 is coming, but it has taken too long and strong/hungry competitors have already come galloping out of the gate.
The usability of Uniswap is also an issue, as most non-technical people struggle with setting up Metamask and all the steps involved with making a trade. We have alternatives now, such as Pancakeswap, that make it easier for less technical people to trade through the mobile Trust Wallet app.
Now I'd like to think that trading is 100% censorship-free in DeFi, but that's not a guarantee. The problem is that the smart contracts of some of these decentralized exchanges are under the control of a developer(s). In theory, they could be compelled to halt trading. However, such action would be completely visible on-chain and a social media disaster for the team.
I believe the long-term solution to this problem is to make the governance of the protocol completely decentralized, so that there is no one private key that can modify the exchange, but rather changes would be implemented automatically if the majority of the token holders voted yay on a proposal. The Tezos blockchain has already implemented this type of automated democratic governance.
We are moving into a world where anybody in the world with a smartphone and Internet connection will be able to trade tokens and participate in this vast digital economy, without fear of being excluded by a big player. This technology really levels the playing field, and opens the financial world to everyone.
Pankcakeswap is already tweeting about working with Mirror Protocol to allow the trading of synthetic GME on Binance Smart Chain.
This Gamestop fiasco has made it clear that in traditional finance (TradFi), the odds are stacked against the average retail investor. It's only a matter of time before they discover the benefits and freedom of trading in DeFi.