Even if we are in bear season in the cryptocurrency markets, developers continue to build. We don’t see innovations very often in the cryptocurrency ecosystem, this is one of them. Today I will introduce you to Fex (Fully Encrypted Exchange). I will explain the differences between CEX (Centralized Exchange) and DEX (Decentralized Exchange). I would like to state that I used this video on the Avalanche Youtube channel as a source.
Let’s start with the advantages and disadvantages of Cex, Dex and Fex.
CEX (Centralized Exchange)
It is a type of exchange where buyers and sellers come together on a central platform. You give your cryptocurrencies to the exchange. Central exchanges hold your cryptocurrencies for you, just like a bank. This has some advantages and disadvantages.
Advantages
CLOB (Central Limit Order Books): Since all orders are collected on a central platform, buyers and sellers can quickly execute their orders. The trading volume of centralized exchanges can easily reach millions of dollars during the day.
Disadvantages
Custodial Risk: You will lose all your cryptocurrencies if the exchange is hacked or the founder disappears. You can find the documentary on a similar situation on Netflix here. Centralized exchanges are always the primary target of hackers.
Potential for front running by insiders: Since the order flow can be seen by the employees, it is very suitable for front running. Situations such as insider trading, fake volume, and price manipulation can be a problem on centralized exchanges.
Potential for stop-loss hunting: Since central exchanges can see your stop orders in addition to your buy and sell orders, they can manipulate the price to trigger your stop orders and bring the price back to its previous level after your order is stopped. Cryptocurrency investors often refer to this phenomenon as the “Bart Formation.”
DEX (Decentralized Exchange)
DEX (Decentralized Exchange) solves some problems, they are exchanges that take place on-chain.
Advantages
AMM or CLOB: Decentralized Exchanges come in two varieties. The AMM version always provides a price and a pool to trade against as long as the pool is liquid. Some exchanges use the Central Limit Order Book.
Non-Custodial: Your tokens are part of a smart contract. They cannot be taken from you unless you authorize a trade of some kind.
Disadvantages
Front running / MEV: Since all your transactions can be seen by on-chain analysis bots, you may be exposed to different attacks (sandwich attack, MEV attack).
All information is public: Your transactions on Dex are visible to everyone. Orders going into Decentralized Exchange are visible to all.
FEX ( Fully Encrypted Exchange)
Introducing Enclave Markets, which innovatively combines the advantages of crypto and advantages of trustless technologies with the use of bridges. This technology was invented at Ava Labs, but Enclave is now an independent spinoff.
Confidential CLOB: Your orders, positions and stop-loss orders are all confidential. Buy and sell orders come in and they kind of sit there, and there is a cross operation that’s performed where the matching orders are matched all at once, and you get your tokens back.
Non-Custodial: The system administrators behind the Enclave Markets don’t have access to the private keys. They are held in special hardware, and even citizens cannot access those keys.
Free from MEV: Enclave Markets cannot and will not front-run and will not allow anybody else to come in between your order and its execution. The smart contract executes one transaction at a time, and as the transaction comes in, it comes in encrypted. It’s decrypted, and as soon as it’s decrypted, atomically it’s executed.
No slippage: Enclave Cross, all of the orders are market orders, and they come in, and if there is a match, your order is executed without impacting the market price. Even in the case of billions of dollars of cryptocurrency trading, the market price remains unaffected, allowing institutional investors to trade large volumes without affecting the price.
Thanks to Enclave Cross, you can also execute your very large volume of buy and sell orders without anyone knowing. In other types of exchanges, when you enter put huge orders in the order book, other orders will definitely come before you, or the market will react to it.
Summary: If you want the best execution at the best price, confidential execution and hide your position, Enclave Markets will be the best choice for you.
Protect Your Alpha
Twitter: @enclavemarkets
