Demo for Binance DEX (decentralized exchange):
Currently, everyone holds Bitcoin BTC as their reserve trading currency.
1. BTC has legacy status as the default trading pair.
2. Trading costs at traditional crypto exchanges are the same, regardless of cryptocurrency. Ex: Binance trading fee is 0.1%, regardless of coin. That’s because transactions are done off-chain.
But we’ve all known the flaw in traditional crypto exchanges: if the exchange collapses or disappears, you lose all your coins, since you don’t have any seed words or private keys.
With a DEX, you hold your seed words & private keys. If the exchange collapses or disappears, you should still be able to access your coins on the respective blockchains.
If DEX exchanges take off, that could be a fatal blow to Bitcoin BTC’s legacy status as a reserve trading currency.
1. Bitcoin BTC’s on-chain transaction costs are [20-200 times more expensive than for other cryptocurrencies](https://bitinfocharts.com/comparison/median_transaction_fee-btc-bch-ltc-dash.html#log&3m) (like BCH, LTC, DASH).
2. Bitcoin BTC has a small block size limit, and can’t scale on-chain, so as DEX trading volume increases, Bitcoin BTC’s [mempool](https://images2.imgbox.com/2c/f1/RG6bXAcK_o.jpg) & transaction costs will skyrocket, making it unusable.
**RESULT**: If decentralized exchanges – like Binance DEX – become popular, Bitcoin BTC on-chain transaction fees will become ridiculously expensive, and people will start looking for a new default cryptocurrency to hold / trade / spend. It will be the end of Bitcoin BTC dominance.