Main Points :
- 1inch co-founder predicts that centralized exchanges (CEXs) will evolve into decentralized exchange (DEX) front ends within 5–10 years.
- 1inch is pivoting toward becoming an infrastructure provider via APIs and non-custodial swap integrations.
- They are rolling out advanced cross-chain, bridgeless swap capabilities (e.g. on Solana) to remove bridge risk.
- DEX trading volume is surging, and decentralized exchanges are gaining market share—even as CEXs invest in on-chain tech.
- Challenges remain: impermanent loss, complex routing, regulatory pressures, and sustainability of incentive-driven models.
- Future innovation themes include dynamic fee models, AI-driven routing, real-world asset tokenization, cross-chain interoperability, and regulatory clarity.
The Central Prediction: CEXs Will Become DEX Frontends
At the Token2049 conference in Singapore, 1inch co-founder Sergej Kunz made waves by asserting that within five to ten years, traditional centralized cryptocurrency exchanges could disappear—at least as independent trading venues—and instead become front ends for decentralized exchanges. According to Kunz, the shift won’t be sudden; CEXs will gradually phase into interfaces that leverage DEX aggregation rather than maintaining isolated order books.
Kunz argues that centralized exchanges currently operate as closed, siloed systems, whereas DeFi aggregators like 1inch act as global hubs of liquidity—able to tap into many chains and protocols. He notes that CEXs are already investing in on-chain systems, implicitly acknowledging that their current architectures are unsustainable in the long run.He frames their adoption of DeFi infrastructure as risk mitigation—i.e., not being left behind as the industry evolves.
This transition might take a decade, he says. But by gradually shifting toward API-based integrations and using DEX infrastructure, centralized exchanges can remain relevant in a DeFi-native future.
1inch’s Strategic Pivot: From Aggregator to Infrastructure Provider
API-First Model & Non-Custodial Swaps
Coinciding with Kunz’s pronouncement, 1inch has publicly shifted its business model to emphasize DeFi infrastructure. Rather than relying solely on its own front end, the majority of its business is now facilitated via APIs that other platforms can integrate. The idea is to embed non-custodial swap functionality into wallets, exchanges, and apps (e.g. partnering with Coinbase) so that users can access DEX trades without leaving their preferred interfaces.
By positioning itself as the plumbing behind multiple user-facing services, 1inch hopes to create a “DeFi network effect”—the more platforms that adopt its API, the more value accrues to its routing, liquidity, and arbitrage logic.
Cross-Chain, Bridgeless Swaps on Solana
In August 2025, 1inch announced a new mechanism for bridgeless cross-chain swaps on Solana. Unlike traditional bridging protocols, which rely on pooled liquidity across chains (introducing counterparty or smart contract risk), 1inch’s approach uses synchronized escrows on both source and destination chains. The user’s funds never leave chain-specific escrows, and withdrawal is contingent on revealing a secret key. If the secret is not revealed, both escrows cancel and the assets revert. The protocol claims this method eliminates “bridge risk.”
This development is part of a broader trend to reduce the vulnerabilities associated with bridges, which have historically been a vector for hacks and exploits.
Improved Routing & Rate Discovery
Earlier in 2025, 1inch updated its route-finding algorithm, claiming it can deliver up to 6.5% better swap rates compared to baseline paths. The core challenge remains: in a multi-DEX, multi-chain environment, finding optimal paths (sometimes through multiple hops or split routes) is nontrivial and computationally expensive.
Academic research is pushing this further. For example, a line-graph-based routing algorithm has been proposed that more systematically identifies profitable paths across numerous DEXs with similar gas cost as depth-first search methods. A recent extension broadens the method to multi-DEX aggregators and adds route splitting to reduce slippage.
Meanwhile, other research explores dynamic fee mechanisms—instead of fixed fees—that adapt to market conditions to reduce impermanent loss for liquidity providers while maintaining healthy trading volume.
These innovations, combined with 1inch’s infrastructure pivot, give it a positional edge if the industry shifts in the direction Kunz forecasts.
Market & Ecosystem Trends: DeFi’s Surge vs. CEX Decline
Explosive Growth in DEX Volume
Decentralized exchanges are experiencing rapid growth in transaction volume. According to a recent report, DEX trading volume in 2025 is up by about 37% overall, with the average monthly volume hitting approximately US $412 billion. Ethereum-based DEXs dominate ~87% of that share.
Another estimate forecasts that by 2025, total DEXs could process as much as US $3.48 trillion in trading volume. Some projections suggest that by 2030, DEXs could capture 65% of all crypto trading activity—though CEXs would still remain relevant for fiat onramps and custodial services.
For reference, the decentralized exchange landscape currently includes well over 800 DEXs globally.
The current snapshot of daily DEX activity places total DEX volumes at around US $16+ billion across 1,080 protocols, making up ~7–8% of total crypto exchange volume.
CEXs Adapting
Some centralized exchanges are responding to this shift by embedding on-chain infrastructure, bridging capabilities, or DEX-like modules. But this is often seen as reactive rather than proactive. Kunz suggests these moves are driven by fear of being left behind.
Still, certain sectors within DeFi face headwinds. In the perpetual DEX (perp DEX) space, for example, the BitMEX CEO recently warned that current platforms like Hyperliquid and Aster may not dominate the market by next year, given their reliance on heavy incentives that may be unsustainable.
Thus, while the direction seems clear, the path is likely bumpy.
Opportunities & Challenges Ahead
Opportunities for Builders & Investors
- API & infrastructure primitives: As 1inch pivots into infrastructure, there is demand for composable building blocks (routing engines, cross-chain escrows, MEV-aware systems).
- Tokenization of real-world assets (RWA): Bringing real assets on-chain (real estate, credit, commodities) will drive DeFi expansion beyond speculative trades.
- AI / ML integration: Autonomous agents for routing, arbitrage, liquidity management, and dynamic strategies may unlock invisible alpha.
- Advanced fee models: Dynamic or adaptive fee mechanisms could improve returns to LPs and prolong the sustainability of AMM platforms.
- Regulatory clarity & safe harbors: DeFi projects need rules that distinguish non-custodial protocols from broker-like services. In the U.S., DeFi advocates have proposed safe-harbor frameworks to shield neutral interfaces from securities registration burdens.
- Cross-chain interoperability infrastructure: Protocols like Chainlink’s CCIP are expanding messaging and asset transfers across blockchains.
Key Challenges & Risks
- Impermanent loss & LP incentives: Many liquidity pools still rely on subsidies or yield farming, which may not be durable.
- Routing complexity & gas costs: As the number of chains and DEXs balloons, optimal route discovery becomes harder and gas/transaction costs matter more.
- Smart contract security & bridge risk: Even “bridgeless” designs can harbor edge-case vulnerabilities.
- Regulation & compliance pressure: Jurisdictions may push enforcement on DeFi platforms, especially around KYC/AML or tax reporting. In 2025, a U.S. proposal to impose broker rules on DeFi exchanges was nullified through legislation supported by industry.
- Sustainability of incentive-driven models: The perpetual DEX space might see shakeouts as incentives decline.
- User experience & education: DeFi is still less intuitive than centralized platforms; UI/UX abstraction layers will be essential.
Narrative Flow & Projections
If Kunz’s prediction holds true, we might see this evolution:
- Short term (1–3 years):
- CEXs embed DEX routing modules and APIs (e.g. via 1inch or others).
- Cross-chain swap mechanisms grow more robust (e.g. bridgeless, escrow-based).
- DEX volume continues to grow rapidly, especially on Ethereum, Solana, BNB Chain, Arbitrum, etc.
- Mid term (3–7 years):
- Many users may not realize they are trading “on a DEX”—the interface will feel centralized, but execution happens via aggregated protocols.
- Custodial exchanges may coexist but with diminished role for order books; they may focus more on fiat rails, compliance, and institutional services.
- Infrastructure-led business models flourish: routing, cross-chain messaging, price oracles, liquidity networks.
- More on-chain real-world asset markets mature, drawing traditional capital into DeFi.
- Long term (7–10+ years):
- CEX as we know them disappear: independent order-book exchanges vanish or get absorbed as frontend skins over DEX infrastructure.
- Majority of crypto trading happens via aggregated, permissionless, multi-chain systems.
- Tokenized assets, algorithmic finance, AI-driven DeFi systems dominate.
- Regulatory regimes adapt to categorize and govern DeFi primitives without stifling modular innovation.
However, this is not guaranteed. Platform failures, regulatory crackdowns, or technological limitations could slow or partially reverse the trend. The transition will likely be messy, hybrid, and contested.
Conclusion
Sergej Kunz’s bold forecast—that centralized exchanges will become DEX frontends in 5–10 years—is more than hype. It reflects the tectonic shifts already underway in decentralized finance: architecture is moving from silos to open liquidity networks, bridge risk is being rethought, and infrastructure is becoming modular and embedded.
1inch’s pivot from user-facing aggregator to infrastructure provider is emblematic of how value capture in DeFi may evolve. Its API-first, multi-chain, non-custodial model is aimed at the plumbing behind many interfaces rather than owning a frontend.
Nonetheless, serious challenges remain: security, routing complexity, LP sustainability, regulation, and user experience. Yet for builders, traders, and capital allocators looking for “the next crypto,” this migration from centralized exchanges to decentralized aggregation is a frontier worth watching. Those who can contribute to routing, gas optimization, cross-chain messaging, or regulatory frameworks may find outsized opportunity in powershift of crypto architecture.
