DEXes offer strong execution guarantees and increased transparency into the underlying mechanics of trading. Trades are trackable, traceable and data is permanently on-chain. This is one of the core basics and the beauty behind the ideology of DEXes. While many have forgotten, I will remind all of you again.
Amidst talks of growing adoption and decentralization becoming the norm, the great decentralized exchange (DEX) vs centralized exchange (CEX) debate is more prominent now than ever before. This debate has many case studies for us to make reference to. The latest would be FTX. FTX owes nearly US$3.1 billion to the top 50 creditors and is estimated there to be “more than 100,000” creditors.
1. Individual Data and Asset Control
CEX holds custody of your deposited assets and all your personal information. You have no control over how the assets and data are being used. While in a DEX environment, it is non-custodial; typically, only an individual wallet address is connected to the exchange. In other words, you have complete control over your assets.
2. Liquidity and Market Depth
3. User Friendliness
CEX provides a wide range of products, including spot and fiat on-ramps, which is most familiar to traditional and crypto traders, especially beginners. DEX products may be harder to grasp with insufficient onboarding guidelines for traders. Again, this point for DEX is changing. The user interface and experience have improved so much; some of the newer DEXes look and function exactly like CEX.
4. Transaction Costs
CEX is known for high transaction or platform costs, especially when the system is hugely loaded with trades simultaneously. An increasing number of DEXes are integrating scaling solutions that will massively increase transaction workload while keeping costs low and passing the savings on to traders.
5. Community Involvement
CEXes, oftentimes one-way, non-reciprocal communication from a central operator to traders. Individual traders are seen as clients utilizing as service that the CEX provides. While DEXes focus on community-building and involvement, where traders can become stakeholders and have a say in protocol changes or share in transaction fees on the platform.
A New DEX Era
The challenge with CeFi and CEXes boils down to a lack of trust and security. This is continually reinforced time and again; this year is clearly no different, with funds, exchanges and even established projects hitting the buffers and leaving behind affected, concerned investors and traders fearing for their assets. News of increased risk with CEXes coming into the question of insolvency and possible delays in withdrawals, causing widespread panic amongst traders.
As usual, I will end with a quote. “The answer is to return to the basics of what blockchain is supposed to be. It is decentralization and transparency. DeFi is one of the solutions, and we need to work together in the future. For now, it cannot replace CeFi completely for obvious reasons, but this will not stop us from trying.” #AnndyLian
Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.
Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.
An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.