Why Whales Need Special DEX Platforms

Since the fall of 2020, it has been common practice for large holders of the dominant cryptocurrencies, Bitcoin and Ethereum, to move assets from centralized exchanges to decentralized exchanges. These large holders are referred to as whales. These whales play a pivotal role in the market. Ipso, the market’s dynamism is dependent on them.

There is a growing interest in decentralized finance. This growth of decentralized has created the need for newer conventions. Conventional platforms and protocols would not process with speed, the heavy volumes accustomed to decentralized finance. Most whale operations are now preferred on DEX platforms and other off-chain solutions to scale the process and reduce the on-chain burden of gas prices, speed of transactions, and congestion on the infrastructure.

Whales, Their Expansionary Activities On The Market

The market is dynamic and this characteristic is reflected in the price, which is controlled by intrinsic factors such as volatility, volume, liquidity, and open interest. These metrics are all interrelated in the market and contribute to the market’s efficiency hypothesis. 

Whales are important to the market. Not only do they signify the growth of a market or its potential, but the expansionary activity of whales also provides optimism for players of all sizes in the market. The whales contribute significantly to the tradeability of an asset class or market in its entirety by the contribution of sheer volume and size per transaction.

Asides from liquidity, there is a strong case for the long-term stability of the financial market (the volatile cryptocurrency market particularly). For investors, the stable operations of the market are central to investment. Despite the overarching influence of day trading and the relatively fewer long-term trading positions, the lodgement of large deposits by investors increases investor confidence and contributes to the growing trust in a peer-to-peer market or exchange as the case implies here. This long-term stability correlates with the number of days a particular asset trades in the exchange.

Capacity, The Volume Of Transactions, And Daily Transaction Count 

Whales are responsible for the recorded increase in the on-chain volume of transactions. Since the historical price slump of major crypto assets, there has been an accumulation of Bitcoin, particularly by whale wallets over the days. According to on-chain data analytics firm, WhaleMap, large wallets have accumulated over 400,000 Bitcoins since Bitcoin fell below its June low.

On the DeFi lending platforms like Aave and Maker, there has been a meteoric rise in the average transaction size. In the first quarter of 2021, the transaction was over nearly $500,000 in Aave, while Maker recorded an average transaction of $1.5 million. With these numbers, the deduction that a significant amount of transaction flow by whales on defi platforms is not only empirical but reliable for long-term decision-making. Progressively, better solutions will enhance subsequent transactions. Scaling solutions on alternative platforms are also a way out of the debates over cost and efficiency.

Of particular note is the growth of decentralized exchanges as options for whale operators. This year, Polygon overtook Binance for transactions processed per second. This growth will continue as networks that will outperform Ethereum will scale remarkably. The result will be an inflow of investment to strengthen the blockchain infrastructure and attract more whales and institutional holders.

For the Arbiturm DEX, it is a case of the goldfish. In 2021, A snapshot page shows that over 41 million holders of the Uniswap native token, UNI, voted ‘for the adoption of Arbitrum on the ‘v3’ version of Uniswap. We are warming up to custom-built DEX, built for whales as crucial and integral to the development of decentralized finance. One of the standout features of the Arbitrum DEX as a specialized platform is that it can execute trades of all tokens including the less liquid tokens. The Arbitrum DEX works with features in its smart contract that adjust buy and sell trades according to a Volume-Weighted Average Price(VWAP) or Time-Weighted Average Price (TWAP) to reduce the impact of possibly manipulated price and the associated changes. In essence, the price of the asset you’re trading won’t be affected by your order size.”

Transaction Cost At Ethereum-Denominated Exchanges

Repeatedly, one throbbing issue has contributed to the growing concern of large asset holders and this is the growing cost of transaction or gas fees on Ethereum-denominated exchanges. Heavy transaction volumes often lead to a concomitant surge in gas fees. Although there is a decline in the gas fees in Ethereum transactions with the migration from Proof of Work to Proof of Stake on the Ethereum blockchain, there is a concern that there might not be a significant reduction in gas prices on high-volume days when the bull market sets sail again. 

The bickering over transaction cost is consistent with the argument put forward by Blockworks, a blockchain-focused events, and media company that even if the Ethereum protocol flawlessly executes the Merge ( its upcoming software upgrade), the protocol will need to provide a more tangible and reliable solution to address the perilous problem of high transaction fees.