Crypto exchanges are often the entry points for newcomers to crypto. Notable exchanges like Binance, Coinbase, Huobi Global, and OKEx trade billion of dollars in digital assets every day.

However, the landscape is extremely competitive—the number of active crypto exchanges reached a peak of 845 in August 2020, but fell to 672 in August this year, according to a report from New York-based blockchain data firm Chainalysis that was released on Tuesday. “Over the last year, the cryptocurrency exchange landscape has become extremely competitive and now appears to be consolidating,” the report read.

To unpack the cutthroat landscape, the report’s authors provided a glimpse into the growth rate of different categories of exchanges, including centralized exchanges (CEXes), decentralized exchanges (DEXes), derivatives exchanges, and others. Chainalysis also examined the factors that make popular exchanges stand out from the rest.

The report defined small exchanges as bourses with under USD 10 million in crypto assets received between August 2020 and August 2021, whereas large trading platforms are those that logged more than USD 10 million in the same period of time. Here are four key takeaways.

#1. DEXes gained steam

Decentralized exchanges, which are peer-to-peer trading platforms that link up crypto buyers and sellers without a know-your-customer (KYC) process, have been gaining popularity because of the exponential growth of decentralized finance, or DeFi. The number of active DEXes more than doubled from around 100 in Q1 2019 to over 200 in Q3 2021.

Large DEXes logged significant growth in transaction volume, which grew from USD 10 billion in July 2020 to a peak of USD 368 billion in May this year. However, the volume slid below USD 143 billion in September.

#2. Derivatives exchanges logged the highest growth in transaction volume, with stablecoins being the most traded asset

Large derivatives exchanges saw the highest growth rate at 686% between August 2020 and August 2021. While centralized exchanges also recorded growth in trading volume, they trailed behind DEXes and derivatives platforms. Nearly all small exchanges, regardless of their business models, processed lower volumes of cryptocurrency.

Stablecoins are pegged to a fiat currency, typically the US dollar. They are the most traded asset for large crypto-to-fiat and crypto-to-crypto exchanges, and are chiefly used by people who rely on stablecoins to lock in their assets’ value when they wish to limit exposure to price swings.

#3. Large exchanges edged out smaller peers

New users are likely to be more familiar with large exchanges, and tend to make their first asset conversions there. These exchanges’ depth of liquidity also attracts traders, but the number of unique crypto assets available on these platforms still determines their survival rate.

#4. Innovation and scale are key to standing out

DEXes embody innovation. Their trading volumes have been climbing because they offer greater control for users and open access to new types of trades. But crypto-to-fiat centralized trading platforms are here to stay, meaning that they will still be the go-to platforms for new and experienced users who want to convert their digital assets into cash.