DeFi is undergoing a renaissance at present, buoyed by favorable tailwinds, from bullish market conditions to Ethereum’s Pectra upgrade that appears to have revitalized the EVM ecosystem. Throw in increasing institutional interest in DeFi products, now that their Bitcoin needs have been catered for, and it’s no wonder that protocols like Aave and Uniswap are reaching record TVLs.
While catalysts such as institutional adoption and rising benchmarks – price, volume, and TVL – are easy to identify, there are other forces driving the resurgence in DeFi activity. And not all of these are immediately evident. In fact, it’s not until you zoom in and start playing around with onchain protocols such as DEXs and perps platforms that you can really start to appreciate how far the industry has come.
Tools that were once the preserve of CeFi are now routinely appearing in their DeFi counterparts. On centralized exchanges, crypto traders have long enjoyed a wide array of order types such as limit orders, stop-loss, and time-weighted average price (TWAP) orders that enable precise control over trading strategies and risk management. And increasingly, DeFi users can now enjoy the same sophisticated features on the leading DEXs and AMMs.
DeFi Grows Up
The first wave of DeFi protocols prioritized simplicity and accessibility, relying heavily on automated market makers (AMMs) like Uniswap’s to facilitate trading. Uniswap was a breakthrough in decentralized trading at the time, which up until then had been limited to complex exchanges such as EtherDelta, where only the most intrepid degens dared venture.
Revolutionary as the AMM model pioneered by Uniswap and other early DeFi players like Bancor was, however, these exchanges often exposed traders to issues like impermanent loss and high slippage, especially for large orders. UX also wasn’t great, even if it was streets ahead of the EtherDeltas that went before it. Over the last five years, though, user experience has improved immeasurably, even as onchain protocols have added complexity by taking advantage of DeFi’s composable, open-source design.
As developers bolt new sections onto DeFi’s modular framework – adding a collateralized stablecoin here, a restaking platform there – doing so without impairing the user experience has been challenging. But dogged developers, aided by millions of dollars in investment targeted at onboarding and UI/UX, have gotten there, which is why the leading protocols now offer a user experience and feature set that rivals the best centralized exchanges – all without relinquishing self-custody, as the following case studies show.
Advanced Trading Features Make Their DeFi Debut
A number of DeFi protocols have been pioneering CeFi-like trading functionalities, engineering solutions that can be integrated into existing decentralized exchanges. As a result, traders can access more powerful features while operating within the interface to which they’ve grown accustomed. Chief among this wave of DeFi-enhancing developers is Orbs, whose flagship products – dLIMIT and dTWAP – have seen more DEX integrations than any other equivalent.
dLIMIT, for the uninitiated, introduces limit orders to DeFi, allowing traders to specify the exact price at which they wish to buy or sell assets on a DEX. It employs an auction mechanism where takers bid to fill orders at the best possible price, ensuring execution as close as possible to the user’s specified limit price, and has been integrated by DEXs across Ethereum, Sonic, BNB Chain, and many more.
dTWAP, meanwhile, allows DEX users to divide a large trade into smaller, evenly spaced executions over a specified period, reducing price volatility and slippage. This is particularly valuable for institutional traders or whales swapping with size. dTWAP also automates dollar-cost averaging (DCA), allowing users to invest fixed amounts at regular intervals, mitigating the impact of short-term market fluctuations. Often integrated in tandem, dLIMIT and dTWAP are easy for DEXs to adopt without altering user experience.
Efficient Cross-Chain Swaps
While Orbs is bringing CeFi features to existing DEXs, 1inch Fusion is adding them to its own. Fusion enhances trading by offering seamless cross-chain swaps complete with advanced features like gasless execution and protection against maximal extractable value (MEV). Using a Dutch auction model for swap execution, 1inch Fusion ensures cost-efficient pricing, with its aggregator connecting users to nearly unlimited liquidity across the omnichain landscape.
Through sourcing liquidity from multiple DEXs, including Uniswap and Curve, 1inch Fusion ensures users get the best possible rates with minimal slippage. Its recent integration with Solana has expanded its reach, enabling cross-chain swaps across over ten blockchains. Fusion’s solver-based system matches supply and demand efficiently, offering a seamless trading experience that rivals centralized platforms while maintaining decentralization. This aggregator model not only enhances pricing but simplifies the user experience, making complex trading strategies accessible to retail traders.
Adaptive Liquidity and Smarter Trading Strategies
The third and final case study we’ll consider, Mangrove, operates as an order book DEX that functions as an adaptive liquidity layer on the EVM. Whereas most DEXs require users to lock funds in liquidity pools, Mangrove allows traders to run sophisticated strategies without losing temporary access to their capital. This means users are free to interact with other DeFi protocols to generate yield while maintaining active trading positions.
Unlike traditional AMMs, Mangrove allows liquidity providers to offer “smart” limit orders that dynamically adjust based on market conditions. This enables more flexible and capital-efficient liquidity provision, reducing the risks of impermanent loss. Mangrove’s design empowers traders to execute advanced strategies, such as stop-loss orders or conditional trades, directly onchain, bringing DeFi closer to the functionality of CeFi order books.
DeFi Meets CeFi
The integration of advanced trading features into DeFi platforms, including those profiled here, has significantly enhanced user experience. It’s a subtle change from a user perspective, but it’s one which, after becoming accustomed, it’s hard to live without. Just as we struggle to recall how we communicated before smartphones, or how we interacted onchain before Uniswap emerged to change the game, it’s now hard to imagine getting by on simple Token A for Token B swaps. They still have their place, but they’ve since been complemented by an array of more sophisticated onchain trading tools.
As DeFi platforms continue to adopt advanced trading tools, the distinction between centralized and decentralized finance is becoming blurred. Protocols like Orbs’ dLIMIT and dTWAP, 1inch Fusion, and Mangrove aren’t just enhancing the functionality of DeFi but aligning it more closely with the tools synonymous with CeFi. These innovations are making decentralized trading a viable alternative to traditional systems, all without sacrificing the non-custodial design that remains DeFi’s greatest strength.
