Decentralized Exchanges — FinCEN, Payment Channels, and Custody, Oh My!
Gary Basin

Q. Are DEXs significantly more secure than centralized exchanges will be with better custody solutions?
A. Hard to justify at this point, especially while they continue to rely on web browsers to connect wallets to the market

This is a verryy interesting question and I must say I have changed my own mind several times in the course of thinking through it.

On one had, it seemed to me that the security risks are simply different for a DEX vs a centralized, custodial exchange. But in both the fundamental challenge is key security, whether it is your own or a centralized custodian’s. In a centralized scenario, there is an added layers of agency risk and a centralized attach surface.

Based on the facts today, I agree you have to give it to the centralized solutions. But that’s more to do with the DEX risks you mentioned, like browser plugins for keys, which put you at risk easily when actually using them. Not to say they would be most popular, but I think DEXs will eventually take over for pure transaction security.

Once again very thought-provoking. Have enjoyed both your posts on the DEX landscape. Thanks.