The crypto-space verily, has evolved over the last few years and keeps changing, this is one reason it’s emphatically important, to clearly understand the unique features of centralized and decentralized exchanges, so as to pragmatically decide which way to go, with respect to the intelligent, profitable and secure handling of your crypto assets.
CENTRALIZED
A centralized exchange (CEX) is one in which a customer transfers funds to his exchange account; once the funds are in, he can then buy/sell crypto coins with those funds. During this time, the exchange holds his funds — whether in fiat or crypto currency — and is responsible for keeping them safe. When he’s done trading, he can also swap those funds into fiat currency and have that amount wired back to his original bank account.
PROS
1. High volume.
2. High number of users.
3. Easy to use
4. Many CEX are licensed, thus regulated by the government. Hence, they are held accountable in case something goes wrong.
5. Some CEX store users’ funds in cold storage, in case of unforeseen eventuality.
6. Margin and forex style of trading are also available on some centralized exchanges; this is loved by many users.
7. Some CEX offer crypto-debit cards which make it easier to spend directly from one’s crypto assets.
CONS
1. Price manipulation. It’s not a deep secret that centralized exchanges engage in price and volume manipulation especially to gain positive reviews and improve their ratings.
2. They almost list anything if they are paid well, sometimes without getting into the nitty-gritty of such projects.
3. On many occasions, centralized exchanges are known for rejecting legit projects simply because they don’t have enough money for listing fee.
4. Possible loss of funds due to hacking.
DECENTRALISED
A decentralized exchange (DEX) is an exchange that has no single point of failure, such as an institution, a person or a server that is in control and running it.
The chief benefit of a decentralized exchange is that a trader doesn’t have to entrust his funds to anyone. Instead, he trades directly with another party, using a blockchain to finalize the operation. He holds his funds in his digital wallet and trades them using the decentralized exchange to find a buyer or seller for his coins. This eliminates custody risk, which is the risk that something bad could happen to the customer’s funds while the exchange operator is in charge of them; that includes losing funds to hackers or having to trust that the operator isn’t doing anything suspicious with your money.
PROS
1. Borderless, global service that’s available to any member of the free internet.
2. A DEX ensures the poor and unbanked can participate in the global economy; anyone can store and transfer wealth to anyone anywhere in the world, almost at no cost.
3. Privacy of users is respected.
4. It’s not controlled by a single group.
5. No sign-up process needed.
6. No kyc needed.
7. No third party interference.
8. Potentially more difficult to hack.
9. Any can easily inspect, copy or improve upon the code that is used for running the network because it’s open source.
CONS
1. It’s difficult if not impossible (at this time) to trade crypto with fiat
2. If your private keys get exposed in any way, your funds could be at risk.
3. Low volume.
4. Less number of users
5. Sometimes things can get out of sync. For instance, an order might appear valid in an off-chain order book, when, in fact, it’s already been fulfilled on the blockchain. This might result in your paying a gas fee for submitting an order to the network and losing funds for nothing when it fails.
Notably, the main difference between a centralized and decentralized exchange, is the presence of third party in the former, while it’s absent in the latter.
LISTING OF PROJECTS
As earlier stated in this article, it’s not clandestine that exchanges are geared towards listing projects that are well to do, in terms of their listing fee. Too often, many a good project suffers rejection, because they lack the required finances to foot the exchange bills; this is a prevalent fact, however it could be managed. How?
Projects should be given the opportunity to prove themselves; their authenticity, vision, technical relevance, use case, the personality of the Devs, their track record etc should be diligently sought out, such that only reputable projects see the light of day; in plain English, LISTING SHOULD BE EARNED NOT BOUGHT.
VOTING AND THE COMMUNITY EFFECT
The strength of any project is somewhat directly proportional to the size of its members; in other words, a community driven project most often than not, is one that has lots of juicy advancement to offer the crypto space in general. This is why it might be a good if not better idea, for exchanges to pay more attention to transparent voting processes for listing, rather than just seemingly solely concentrating on projects that can meet up with their financial demands.
Once upon a time there was a project (name withheld) that was the rave of the moment, it seemed to be the financial ‘messiah’ some had been waiting for; They intelligently paid their way through to get listed on various exchanges; everything was going well until suddenly it stopped going well; what happened? Users funds were gone. Only if assiduous care was employed in vetting their credentials, investors’ funds would have been spared.
Conclusively, it should be noted that at CENTAURE, we frown at these abnormalities and will only be listed on exchanges based upon voting rounds and on decentralized exchanges.
When transparent voting is organized, projects loved by active communities prevail and It’s without doubt that an active, holistic, vision-knit community is a value/traffic/volume generator.
Please do visit https://www.centaure.io for more information.
