But here's the kicker. We're closing in on the end of this old exchange world. Centralised crypto exchanges are losing their lustre. They're missing out on what makes crypto so attractive in the first place - they're not trustless, transparent, or resistant to censorship. Plus, they're not getting the love from traditional finance due to regulatory hurdles and exclusion.

But fear not. This might seem like a bump in the road for crypto, but it's actually a green light for DeFi to take the lead. As centralised exchanges become more of a hassle and less secure, people are bound to look elsewhere. Think of it like a second chance to get in early on Binance in 2017.

And let us tell you, these “next exchanges” are being built on Ethereum L2s 👀

TLDR 📃

• Despite Binance’s issues, we have to remember that it had an incredible 250x user growth since 2017, and BNB outperformed it, turning a $100 investment into $1.7M+ in four years.
• Centralised exchanges are coming to their end, though, and now it is time to look at the “next Binance” in DeFi. The key will be to look for exchanges that offer leverage (Perp-DEXs), which made Binance a star.
• Layer-2s are taking a lot of the attention, with even exchanges like Coinbase choosing to go on there, so the next Binance is likely being built on there. GMX and Kwenta are two prime candidates.
• If you want to avoid trying to pick the Perp-DEX winner, owning Layer 2 tokens like ARB and OP could be like owning the 'land' on which these trading venues are built, especially with a potential increase in revenue.

Disclaimer: Not financial nor investment advice. Any capital-related decisions you make are your responsibility and yours only.

First, the type of exchange that captures the most growth 📊

What really drew users to Binance, the biggest centralized exchange? Not the higher spot volume than Coinbase, but the juicy derivatives trading volumes. It’s miles ahead of Coinbase, which doesn't even offer leverage.

In fact, Binance boasts six times more volumes on its derivatives than its spot market and a whopping 60 times more than what Coinbase has on its spot exchange.

So, users will want that sweet leverage in their new trading spot. And while we adore Uniswap and other DEXes, the average Joe won't find what he's looking for there, as they simply don’t offer leverage.

That narrows our options down to one: perpetual DEXes, which provide that crucial ability to trade with leverage in a decentralized way.

But where will these new-favourite DEXes be built? On Solana, Avalanche, or Ethereum? Or…?

Second, the networks to look at ⛓️

One ecosystem is outshining the rest in terms of growth and potential: Layer 2. The total value locked (TVL) in Layer 2s has been skyrocketing since 2022.

With all the momentum they already have, an upcoming game-changer called the EIP-4844 upgrade is set to make Layer 2s even more attractive by drastically reducing fees. They'll be as cost-effective as Solana.

We're not the only ones seeing the writing on the wall. Even centralized exchanges are getting in on the Layer 2 action, signalling a shift away from their own platforms.

Take Coinbase, which is working on a Layer 2 solution named Base that'll live on Optimism. Bybit is also cooking up its own Layer 2 called Mantle.

This move by Coinbase and Bybit is akin to radio stations admitting their model is outdated and embracing the digital shift. It's like a radio station making the jump to create Spotify, acknowledging that the transition to DeFi is inevitable.

So, if these billion-dollar powerhouses are betting big on Layer 2s, it's pretty clear that's where the users are headed.

But the million-dollar question is: which perpetual DEXes will they flock to?

Third, the future “Binances” 💱

There are multiple competitors in the Perp DEXs arena, including dYdX, but that one is moving onto its own chain soon. So, let’s discover which ones, built on L2s, are most likely to capture market share.

There are two main players on L2s: one on Arbitrum (GMX) and one on Optimism (Kwenta).

To date, GMX has been the top perpetual DEX on Arbitrum and the go-to for leverage trading, but it recently started seeing a slowdown in growth. All while, Kwenta continues its upward trajectory with increased volumes.

Despite those volumes, though, GMX still generates more revenue, but that’s a strategic decision Kwenta made by keeping their fees low to attract more users. GMX has its V2 coming up, this can give it the boost it needs to come back ahead of Kwenta, but the latter isn’t just a sitting duck.

It’s coming to take over GMX’s territory: Arbitrum.

One of the weaknesses of Kwenta has been its decision to remain on Optimism despite Arbitrum being the bustling ecosystem - and now, rumour has it that it is about to change 👀

Don’t get us wrong, we think multiple Perp DEXs will win, including GMX, Kwenta and dYdX, but today we’re going after which one grows the quickest, and Kwenta is a prime candidate with its recent moves.

Note: Kwenta is built on Synthetix, which gives SNX stakers more yield and SNX itself more value.

But… what about ARB & OP? Where do they fit into all of this? 🔵🔴

Owning an exchange is great but imagine owning the land where all the trading hubs stand. Think of it as being the landlord for networks like Optimism and Arbitrum, which are raking in significant fees from network usage.

As of now, these Layer 2 solutions (L2s) are barely making revenue. They make just as much as Kwenta earns from its users.

This isn't much since they have to pay a portion to Ethereum to settle their transactions.

However, an upcoming upgrade will significantly cut down the settlement cost to Ethereum. They could then potentially make as much as five times more revenue by not reducing fees at the same rate.

Next, to make ARB or OP token holders part of the action, they need to change the revenue-sharing system. Instead of sharing it with a central sequencer, that revenue can be distributed amongst stakers just like on the Ethereum L1. This is something we’re really hoping they implement.

Cryptonary’s take 🧠

The Binance controversy is a mess, but it's not all bad news. Even though it feels like the US is messing with crypto to protect the faltering US dollar 💵, we're sure crypto will win.

The failure of FTX and the troubles at Binance and Coinbase (let's hope those last two weather the storm) simply remind us of how important DeFi is as a solution to these issues.

But hey, “history doesn’t repeat itself, but it often rhymes,” so what we learned from Binance’s stupendous growth is that it’ll happen again somewhere in DeFi - specifically on Perp DEXs. And from all of the pointers, it seems highly probable that that “next Binance” actually lives on a Layer-2.

One way to avoid trying to pick the winning Perp DEX is to bet on Layer-2s in and of themselves, such as ARB, OP and soon zkSync’s own token (which you should be farming an airdrop for).

Other news 📰

• **Optimism successfully completes ‘Bedrock’ upgrade. The Optimism network completed its "Bedrock" upgrade on June 7. This upgrade reduces deposit times, offers users lower fees, and introduces additional security features, as announced by OP Labs.
• Arbitrum distributes 4 million additional $ARB tokens from airdrop allocation to DAOs: Arbitrum has deposited $6M worth of $ARB tokens this week to the DAOs that were part of the $ARB airdrop. We can expect activity from the DAOs soon regarding these tokens.
• Polygon to onboard Deutsche Telekom as validator: Germany's Deutsche Telekom is set to become one of the 100 validators for Polygon. This partnership will allow Deutsche Telekom to provide staking and validation services for the network and Polygon's Supernets solution.