Businesses face intensifying competition and revenue pressure as CEXs race for the future on-chain
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Businesses face intensifying competition and revenue pressure as CEXs race for the future on-chain
When the "iron rice bowl" is shattered, CEXs launch the on-chain war.
Navigating Web3 tides with focused insightsAuthor: BUBBLE, BlockBeats
Centralized exchanges are undergoing a collective strategic shift. From Coinbase’s nearly $2.9 billion acquisition of derivatives platform Deribit and its partnership with Shopify to promote USDC adoption among physical merchants, to Binance launching its Alpha program to reshape primary market pricing mechanisms. Kraken has acquired NinjaTrader to expand into options markets and partnered with Backed to launch “U.S. stock” services. Bybit has also opened trading for gold, stocks, forex, and even crude oil indices on its main platform.
Top-tier exchanges are actively expanding their revenue streams, attempting multidimensional "replenishment" — from off-chain to on-chain, retail to institutional, and major cryptocurrencies to altcoins. At the same time, these platforms are extending their reach into the on-chain ecosystem. For example, Coinbase has integrated a DEX routing protocol from the Base chain directly into its main app, aiming to bridge liquidity barriers between CeFi and DeFi and reclaim trading volume siphoned off by on-chain protocols like Hyperliquid.
However, behind these moves lies persistent pressure on actual revenue generation, as crypto exchanges face unprecedented development bottlenecks. Coinbase's latest financial report shows that its transaction fee revenue has plummeted from $4.7 billion in 2024 to just $1.3 billion in Q1 2025, a 19% sequential decline. BTC and ETH trading volume share dropped from 55% in 2023 to 36%, making revenues increasingly dependent on the more volatile altcoin segment. Meanwhile, operating costs remain high—$1.3 billion in Q1 2025 alone, nearly matching income. Binance faces similar challenges; according to TokenInsight, its average transaction fee revenue since late 2024 has hit a three-year low, despite maintaining market leadership in terms of share.
Binance's trading volume has mostly remained低迷 over the past year. Source: CoinGecko
With shrinking fee margins, continuous fragmentation of on-chain liquidity, and traditional brokers re-entering the space through compliant channels, centralized exchanges (CEX) are being forced to transform into "on-chain platforms." Influential KOL ASH noted on X that as more DEXs refine their trading mechanisms, creating products with user experiences rivaling CEX while offering greater transparency, CEXs have finally taken notice. They are shifting strategic focus toward permissionless models, sparking a battle among multiple CEXs for dominance in the "on-chain CEX" arena.
OKX: Focused on Infrastructure Development
In OKX's annual letter dated December 30, 2024, founder Star Xu expressed firm belief that "true decentralization will drive mass adoption of Web3," emphasizing efforts to build a bridge between traditional finance and decentralized finance.
This vision is not mere rhetoric. Aside from Binance, OKX is one of the earliest and most systematic centralized exchanges building on-chain infrastructure. Rather than releasing isolated tools or wallets, it is pursuing a "full-stack construction" strategy to create a Web3 operating system capable of replacing centralized scenarios, forming a closed loop between user assets and CEX.
In recent years, OKX has steadily advanced its strategic development of on-chain infrastructure, aiming to transition from a centralized exchange to a core participant in the Web3 ecosystem. A key component is OKX Wallet—a non-custodial wallet supporting over 70 public chains—integrated within the Web3 suite featuring Swap, NFT, DApp browser, inscription tools, cross-chain bridge, and yield vault functionalities.
OKX Wallet is not just a standalone product but the central hub of OKX’s Web3 strategy. It connects users with on-chain assets and bridges centralized accounts with on-chain identities. Thanks to its comprehensive feature set, many newcomers entering crypto around 2023 had their first on-chain experience via OKX Wallet.
On the foundational layer, OKX continues investing in underlying networks and developer ecosystems. As early as 2020, it launched OKExChain (later renamed OKTC), an EVM-compatible Layer 1 blockchain, though the chain did not gain significant market traction. Nevertheless, OKX developed essential components such as block explorers, developer portals, contract deployment tools, and faucet services to encourage developers to build DeFi, GameFi, and NFT applications within its ecosystem.
Through ongoing hackathons and the establishment of an ecosystem support fund, OKX is cultivating a fully闭环 on-chain ecosystem. While OKX has never disclosed total investment figures, given the scale of its wallet, chain, bridge, tooling, and incentive systems, industry estimates suggest its infrastructure spending exceeds $100 million.
Binance Alpha: Monetizing Reputation and Liquidity
In 2024, the crypto market experienced a bull run fueled by the approval of Bitcoin spot ETFs and meme coin mania. Despite apparent liquidity recovery, beneath the surface lay a breakdown in pricing mechanisms between primary and secondary markets. Project valuations became artificially inflated during VC rounds, token release cycles stretched longer, and ordinary users faced rising entry barriers. When tokens eventually listed on exchanges, they often served merely as exit ramps for project teams and early investors, leaving retail investors holding bags after "peak at launch" price collapses.
Against this backdrop, Binance launched Binance Alpha on December 17, 2024. Originally an experimental feature within Binance Web3 Wallet for discovering high-quality early-stage projects, it quickly evolved into a pivotal tool for reshaping on-chain primary market pricing.
Binance co-founder He Yi publicly acknowledged structural issues with "peak at launch" listings during a Twitter Space addressing community concerns, admitting that traditional listing models are no longer sustainable under current trading volumes and regulatory frameworks. Past attempts—such as voting-based listings or Dutch auctions—to correct post-listing price imbalances yielded limited success.
The introduction of Binance Alpha represents a strategic alternative to the old listing system, operating within controlled parameters. Since launch, Alpha has onboarded over 190 projects across ecosystems including BNB Chain, Solana, Base, Sonic, and Sui, gradually evolving into a Binance-led platform for discovering and warming up early-stage on-chain projects—an experimental path for regaining initial pricing power.
After the rollout of the Alpha Points mechanism, it became a hotspot for retail "airdrop farming." Participation expanded beyond niche crypto circles into broader Web2 audiences. The attractive rewards prompted some to mobilize entire families, offices, or even villages to join.
Despite increasing competition and cases like ZKJ crashing after Alpha listing raising compliance concerns, community sentiment remains divided. Prominent KOL thecryptoskanda praised Alpha highly, calling it Binance’s second-greatest innovation after IEO. Analyzing its role in the ecosystem, he stated: “The historical mission of Binance Alpha is to dismantle the primary market pricing power held by North American VCs like a16z and Paradigm, who can raise funds from TradFi at near-zero cost, and bring that power back into Binance’s orbit. It aims to crush competing exchanges’ altcoin listing markets, preventing phenomena like Grass emerging on Bybit and diverting attention elsewhere. Simultaneously, it funnels capital from all chains into BSC, turning them into Binance’s capital pool. So far, Alpha has successfully achieved all three goals.”
Coinbase Connects to DEX: Feeding Base with Institutional Capital
Following in the footsteps of Binance and OKX, Coinbase has begun integrating on-chain ecosystems. Its initial strategy involves incorporating DEX trading and verified liquidity pools. At the 2025 Cryptocurrency Conference, Max Branzburg, Vice President of Product Management at Coinbase, announced that DEX functionality from the Base chain would be integrated into the main Coinbase application, enabling embedded DEX trading.
Users will be able to trade any on-chain token via Base-native routing, packaged into KYC-verified liquidity pools accessible to institutions. Coinbase currently boasts over 100 million registered users, 8 million monthly active traders, and customer assets valued at $328 billion according to investor reports.
Retail trading accounts for only about 18% of activity on Coinbase. Since 2024, institutional trading volume has steadily increased (Q1 2024 saw $256 billion in institutional trades, representing 82.05% of total volume). With Coinbase now integrating Base’s DEX, combining DeFi’s breadth with TradFi’s compliance standards could inject massive liquidity into tens of thousands of Base-based tokens. More importantly, numerous Base-native products may now gain access to real-world compliant pathways through Coinbase.
Aerodrome, Base’s leading native DEX, has recently become a focal point of discussion. As one of the first DEXs embedded into Coinbase’s main app, it surged 80% in the past week, adding nearly $400 million to its market cap.
Community reactions are split. Influential KOL thecryptoskanda criticized Coinbase’s approach, arguing that mimicking Binance Alpha by allowing app-based purchases of Base assets is merely superficial imitation. However, KOL 0xBeyondLee countered that Coinbase’s move differs fundamentally from Alpha: “Alpha maintains gatekeeping—it doesn’t list every coin. Coinbase’s model allows *all* Base assets to appear. It’s like being able to trade shares of your neighborhood fruit stand directly on Tonghuashun. In terms of liquidity and attention, the boost to Base is unprecedented.”
Coinbase’s push into on-chain liquidity doesn’t stop there. Prominent KOL TheSmartApe (@the_smart_ape) announced on social media that he plans to sell his $Hype holdings, which he’s held since TGE. He explained further: Hyperliquid currently has approximately 10,000–20,000 daily active users and around 600,000 total users, with 20,000–30,000 core users generating nearly $1 billion in revenue, much of it from U.S.-based traders.
Most U.S. traders use Hyperliquid simply because they lack better alternatives. Excluded from Binance and other major CEXs, they have no access to perpetual contracts. But with both Coinbase and Robinhood announcing plans to roll out perpetual futures in the U.S., Hyperliquid faces a major threat. A large portion of its core user base may migrate to Coinbase or Robinhood. Safer, easier access without self-custody, avoiding complex DeFi UX, and backed by regulators like the SEC—Coinbase offers what most traders truly want: security and usability. Many don’t care about decentralization—they’ll use whatever works best.
Byreal: Bybit’s On-Chain Twin
Compared to Binance and OKX, Bybit’s moves in the on-chain race are more “restrained”—no building its own chain or rollup. Instead, it focuses on lightweight advancement across three areas: “user gateway,” “on-chain trading,” and “fair issuance.”
Starting in 2023, Bybit began separating its Web3 brand identity by launching the Bybit Web3 Wallet, embedding core on-chain functions (Swap, NFT, inscriptions, GameFi). The wallet integrates a DApp browser, airdrop campaign pages, and cross-chain aggregation trading, supporting both EVM chains and Solana, aiming to serve as a lightweight bridge for CeFi users transitioning to on-chain environments. However, amid fierce wallet competition, the initiative failed to gain significant traction.
Bybit then shifted focus to on-chain trading and issuance platforms, launching Byreal on Solana. Byreal’s core design philosophy is to replicate the centralized exchange “matching experience,” using a hybrid RFQ (Request for Quote) + CLMM (Concentrated Liquidity Market Making) model to enable low-slippage trading, along with mechanisms like fair launches (Reset Launch) and yield vaults (Revive Vault). Its testnet is scheduled to go live on June 30, with mainnet launch expected in Q3 2025.
Meanwhile, Bybit introduced Mega Drop on its main platform, completing four rounds so far. The model allows users to automatically earn token airdrops through staking. Estimated returns suggest a $5,000 stake yields around $50 per round, varying based on project quality.
Overall, Bybit’s strategy in the on-chain race emphasizes “low development cost and leveraging existing public chain infrastructure” to build a bridge connecting CeFi users with DeFi use cases, enhancing its on-chain discovery and issuance capabilities through components like Byreal.
The wave of decentralized derivatives ignited by Hyperliquid has evolved from a technical paradigm shift into a fundamental restructuring of competitive dynamics among exchanges. The boundary between CEX and DEX is blurring. Centralized platforms are proactively going on-chain, while on-chain protocols are increasingly emulating centralized matching experiences. From Binance Alpha reclaiming primary market pricing power, to OKX building a full-stack Web3 infrastructure, to Coinbase leveraging compliance to tap into the Base ecosystem, and even Bybit constructing its own on-chain doppelgänger via Byreal—this “on-chain war” is far more than a technological race. It is a contest for user sovereignty and control over liquidity.
In the end, whoever dominates future on-chain finance will depend not only on performance, user experience, and innovative models, but also on who can build the strongest capital flow network and deepest channel of user trust. We may be standing at the tipping point of deep CeFi-DeFi integration. The winner of the next cycle may not be the most “decentralized,” but rather the one that best understands on-chain users.
Hype! Hype! Hype!
In April 2020, dYdX launched the first decentralized perpetual contract pair BTC-USDC, marking the beginning of DEXs’ journey into derivatives. After five years of evolution, Hyperliquid unlocked the true potential of this domain. To date, Hyperliquid has accumulated over $3 trillion in total trading volume, with daily volume approaching $7 billion.
As Hyperliquid breaks into the mainstream, decentralized exchanges have become a force that centralized platforms can no longer ignore. Amid slowing growth and user diversion to DEXs led by Hyperliquid, CEXs urgently seek the next “growth anchor.” Beyond stablecoin expansion or payment-oriented “revenue generation” strategies, the immediate priority is a “leak-stopping” strategy—recapturing derivative traders flowing onto-chain. From Binance to Coinbase, major centralized exchanges are integrating their on-chain resources. Meanwhile, community attitudes toward blockchain have shifted—from fixating on “decentralization” to prioritizing “permissionless access” and “capital security.” The line between decentralized and centralized exchanges is fading.
In previous years, DEXs symbolized resistance against CEX power monopolies. But over time, DEXs have progressively adopted—and even replicated—the core techniques of the once-dominant “dragons.” From UI design to order-matching mechanics, liquidity structures, and pricing models, DEXs have reinvented themselves by learning from CEXs—and in some ways surpassing them.
Now that DEXs can match most CEX functionalities, even suppression by CEXs cannot dampen market enthusiasm for their future. They now represent not just “decentralization,” but a transformation in financial paradigms and underlying asset issuance models.
CEXs, too, are fighting back—not only by diversifying business channels but also by binding on-chain liquidity to their own ecosystems to compensate for dwindling trading volumes and user counts lost to DEXs.
Markets are most creative and vibrant when filled with diverse competition. The rivalry between DEXs and CEXs reflects an ongoing compromise between market forces and reality. This “on-chain war” over liquidity dominance and user attention has long transcended pure technology. It’s about how exchanges redefine their roles, capture next-generation user demands, and find new equilibrium between decentralization and compliance. As the lines between CEX and DEX blur, the future belongs to those builders who navigate the optimal path between “experience, security, and permissionless access.”
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