The Great Integration of Exchanges and On-Chain: The Evolution of CEXs

Author: @defioasis

Summary - Binance Alpha 2.0 has a daily buying power of between $1.5 million and $4 million - Binance Wallet is the place with the largest spot trading volume after Binance Main, surpassing any other exchange - Gate Alpha logic is exactly the same as Binance Alpha 2.0, with a daily trading volume of $1 million to $2 million and a daily buying power of $20-250,000 - Bitget Onchain achieves results with Binance Alpha 2.0 is similar, but the management model is more complex, with a daily trading volume of $3 million to $4 million - In the OKX DEX, Solana is still the main network that users participate in - Gate Innovation Zone closes and fully embraces the alpha form, but MEXC Meme+ is still retro used to set up alternative trading sections on exchanges to carry out on-chain trading Why do exchanges deploy on-chain? There are two practical factors: one is that the valuation of the online VCcoin is too high and there is no wealth effect; The other is that the meme issuance speed is too fast, explosive but the cycle is short, and the wealth effect is short-lived and rapid. These two results cause users to take their money out of the exchange and play on the chain, resulting in the sinking and loss of exchange funds. The essence of the exchange form is rooted in traditional brokers, this form cannot penetrate the chain, and due to the contradictions of VCcoins tokens, they have to be forced to do on-chain. So from another perspective, this has undoubtedly given rise to an unprecedented trading pattern. The great integration of exchanges and on-chain is not only how exchanges lay out on the chain, but the emergence of a new form of trading, and the exchange has evolved from a “centralized matching platform” inheriting traditional brokerages to a “full-stack on-chain and off-chain trading network”. The prototype of the Great Convergence may have started with OKX embedding a wallet in the exchange’s website/app, making the on-chain entrance silky. Subsequently, an alpha pattern appeared on the basis of Wallet, and the exchange station directly purchased on-chain assets. At present, the layout of exchanges on the chain can be divided into three forms: Alpha, API DEX and independent trading of on-chain assets. Alpha Alpha relies on Wallet and is directly integrated into the main station of the exchange, CEX and DEX have a deeper degree of integration, and you can use the capital sinking in the exchange station to directly purchase the on-chain assets on the Alpha line, and Wallet executes the buying and selling logic, which represents Binance Alpha 2.0, Gate Alpha and Bitget Onchain (1) dual-address centralized management mode, which represents Binance Alpha 2.0 and Gate Alpha dual (contract) address centralized management mode, that is, one contract address holds stablecoin and network gas assets, and the other contract address holds altcoin assets, and then the contract address that holds stablecoin assets executes the buying and selling logic. There is an alpha account for users in the exchange, which is parallel to the spot, funding, wealth management and futures accounts. The logic of Gate Alpha is exactly the same as that of Binance Alpha 2.0. From the simple point of view of the chain, from the perspective of altcoins, from the contract address of the stablecoin assets -> the contract address of the altcoin assets, that is, the purchase; From the contract address where the altcoin asset is kept -> The contract address where the stablecoin asset is kept is sold. Going deeper into a specific transaction, judging from the single transaction of ZKJ sold to USDT in Binance Alpha 2.0 on the figure, the contract address of the stablecoin asset is kept: 0x6a… 1b90 is executed as a proxy trade, ZKJ from the contract address where the altcoin assets are kept: 0x73… 46Db goes to Binance Wallet: DEX Router for sale, and the USDT obtained goes to the contract address where the stablecoin assets are kept: 0x6a… 1b90。 Therefore, at the transaction level, Binance Alpha 2.0 is actually another layer of buying and selling nesting of Binance Wallet, but using the same route as Binance Wallet. Trading Alpha tokens is relatively cheaper to use Binance Wallet directly than Binance Alpha 2.0 – which is also reflected in the decline in Binance Alpha 2,0 trading volume in Binance Wallet, which is currently only around 25%. Binance Alpha 2.0’s daily trading volume peaked two days before the end of the first BSC trading competition, with a daily average of more than $2 billion, with BSC accounting for 99%. At present, Binance Alpha 2.0 has a cumulative trading volume of more than $47 billion, maintaining a daily trading volume of between $1.8 billion and $2 billion per day. As users’ trading behavior shifts to Binance Wallet, Binance Wallet is already home to the largest spot trading volume outside of Binance’s main site, surpassing the spot trading volume of any exchange other than Binance. Alpha Buying Analysis The brushing behavior of winning airdrops has greatly increased the trading volume of Alpha tokens, and the more noteworthy indicator is that Binance Alpha 2.0, which is spliced with the sinking of user resources on Binance site, can bring more buying orders to the new coins listed and how much selling pressure it can withstand is more worthy of attention. According to HUMA data some time ago, in the 24 hours of the airdrop, HUMA sold a net of $2.116 million in Binance Alpha 2.0, and the selling pressure on the first day of listing was basically the same as that of the previous airdrop projects, about $2 million to $2.5 million. This number is also roughly the range of airdrop value given to Binance Alpha users. There is a high probability that new VCcoins will break online, and they will generally experience a sharp decline of about 20%-50% in the first two days, and then open a sideways buying session, and then pull up. On the other hand, the current daily purchasing power of Binance Alpha 2.0 is about $1.5 million to $4 million (the sum of the net buying volume of all Alpha coins), which is about $2 million per day under normal circumstances, and the intraday net buying volume that can be brought to a single coin is about $50w; However, on some days when BSC is doing well, Binance Alpha 2.0’s daily net buying power can reach $4 million, such as BOB a few days ago, which doubled in one day, and its net buying volume once exceeded $1.4 million on that day. Binance Alpha 2.0 is still significantly ahead of other exchanges. The overall daily trading volume of Gate Alpha is probably between $1 million and $2 million, and there are activities that can reach more than $3 million. The daily purchasing power of Gate Alpha is about $200,000-250,000, and it is greatly affected by hot coins, sometimes a single coin accounts for almost half of the purchasing power of the entire Gate Alpha. (2) Decentralized address management mode, which means Bitget Onchain From the final result of the implementation, Bitget Onchain is similar to Binance Alpha 2.0 and Gate Alpha, which can allow users to directly use the on-site capital of the exchange to purchase specified on-chain assets, all of which are executed by trading on behalf of the transaction. However, unlike Binance Alpha 2.0 and Gate Alpha, Bitget Onchain does not adopt dual contract addresses to manage user assets. Bitget Onchain helps exchange users execute proxy trading through EOA addresses and Bitget Wallet: Swap Router. When Bitget Onchain is sold on BSC and Base, it goes from an address that holds altcoin assets to another address that holds U assets through Bitget Wallet: Swap Router; Vice versa. There are hundreds of addresses for these altcoin and U assets, rather than being included in two unified contract addresses. It was further discovered that the value of U deposited in a single address where U assets were kept was about $20,000. Bitget is one of the earliest exchanges to do on-chain integration, but unfortunately, Binance Alpha 2.0 took the lead. This set of sub-address management mode is matched with Bitget’s strategy to achieve AI fast listing on Onchain, one is to help prevent the capital sink from being cut and withdrawn by some shitcoins, and the other is to help price protection, but the disadvantages are also obvious, easy to execute failure and need to continue to expand. Because there are so many address sets, there is no way to get them all. I asked my friends on Bitget, and at present, Bitget Onchain has a daily active population of 1-15,000 people, and if there is activity, it can reach 20,000; The daily trading volume is between $3 million and $4 million, and if there is activity, it can reach more than $4 million; Bitget Onchain may also be on par with Binance Alpha 2.0 in the future, and will adjust the underlying architecture and add middle-tier contracts for management in the future. Summary: At the level of VCcoins, the launch of Binance Alpha 2.0 is very simple, and there is basically no opportunity for other exchanges to participate, but Binance has no way to list Memecoins too early, especially for Memcoins other than non-BSC. Therefore, under the premise of Binance Alpha 2.0, other exchanges are still doing Alpha products, in addition to the on-chain layout at the strategic level, the biggest opportunity is in Solana, which Binance cannot fully cover, and the new Memecoin assets above. Both Gate Alpha and Bitget Onchain have started using AI to list potential new assets for exchange users to trade. The idea is very clear, but unfortunately the Solana meme is not very competitive now, if the meme market recovers, I believe we can see the growth of the trading volume of the two. API DEX API DEX is a business that does external access API calls and pumps, which stands for OKX DEX, but at present, OKX still keeps the API free and open. OKX is the first to do transactions with embedded wallets on the exchange site, and is committed to making the entrance and trading more silky. OKX provides DEX APIs, trading APIs, and market APIs, which can cover the complete core system modules of the DEX, including single-chain spot trading, exchange order execution, cross-chain exchange, transaction simulation and on-chain listing, as well as real-time market and on-chain data analysis. OKX DEX is a full-chain DEX, but in order to be statistically aligned with Binance Alpha 2.0, among the five main chains, the daily trading volume of the returned OKX DEX is about 2-250 million, and the daily trading users are around 100,000. It is not difficult to find that in the OKX DEX, where transactions are relatively real, Solana is still the main network that users participate in, which is completely different from Binance Alpha 2.0’s data that is completely out of tune and skewed towards BSC. In addition, by opening up APIs, exchanges can attract more external platforms and create a network effect. Both Alpha and API DEX are essentially the deepening of the exchange wallet business, so as to realize the conversion of exchange site users to the chain through seamless/silky entrance. The alternative trading section of on-chain assets The alternative trading section of on-chain assets is completely embedded in the spot of CEX, without the help of any wallet execution, and it is also an exploration of on-chain assets in the early stage of CEX’s launch, represented by the Gate Innovation Zone and MEXC Meme+. Users can directly use the assets on the exchange to buy early on-chain tokens such as Memecoins in the dedicated on-chain trading section, which is consistent with the spot trading on the exchange, and can be traded at the current price and pending orders, and only need to bear the handling fees of the exchange, without slippage and DEX taxes. However, although a small part of the chips designated for trading on the chain may be deposited by users on the chain after the exchange is listed, it is more likely that the internal department of the exchange bought a certain amount of assets on the chain in advance and placed them in the exchange to attract users to buy, and the exchange bears the huge risk of the token falling, so the exchange will not buy too many assets, and the result is that the trading volume and liquidity of on-chain assets in the alternative trading section of the exchange are very poor. Since the assets are held and managed internally by the exchange, there is a lack of direct on-chain liquidity, which makes it difficult to attract long-term users, and it is still necessary to transition to an alpha or API DEX model in the future. Recently, Gate announced that it will be closing the Innovation Zone to fully embrace Gate Alpha.