CEX vs. DEX: Which Crypto Exchange Model is Best?

The widely discussed talk of the crypto landscape is about DEX Vs. CEX (Decentralized crypto exchanges vs. Centralized crypto exchanges) in the recent past. Am going to give an overview of the definitions and the pointers to understand types of crypto exchanges in simpler business terms.

CEX — Centralized crypto exchanges:

1. There will be third party operator
2. Fiat currency transactions will be allowed
3. Market Makers & Takers will be part of the platform
4. Entries will be in Database most of the times until the cashout or coin pull happens
5. The volume of the transaction will be more
6. Better Speed of Trading ( No Real Time Crypto Node update )
7. Liquidity will be more comfortable
8. Robust Know Your Customer (KYC) and Anti-Money Laundering (AML) practices
9. Private Keys stored in system & associated with User credentials in the crypto exchange application
10. Prone for hacking/cracking of the system

DEX — Decentralized crypto exchanges:

1. No third party operators
2. Fiat currency transactions will not be allowed
3. Most of the times Market Takers will only be part of the platform
4. Direct updating of trading transactions on Crypto Nodes. No database entries
5. The volume of the crypto trading transaction will be very less
6. Low-grade Speed of Trading ( Due Real Time Crypto Node update )
7. Liquidity will be the challenge (only handle Crypto Coins on Nodes)
8. No, Know Your Customer (KYC) & Anti-Money Laundering (AML) practices
9. No Private Keys in the application
10. Not the first choice of hacking/cracking of the system

On the whole, we could compare DEX & CEX on the following parameters:

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Security:

DEX works much better as Private Keys are not part of the application. In CEX user could retrieve his username. In DEX, is the use of loose Key or Hardware, they lose the asset completely.

Third Party Operator:

CEX works with a Third Party/Authority Body, which is against “Satoshi Nakamoto’s”primary objective.

Volume/Speed of Transactions:

CEX is much better. DEX is slow.

Regulatory Needs:

KYC & AML makes the regulation easy (wherever it is needed), which is part of CEX. Again this against “Satoshi Nakamoto’s”primary objective.

User Experience:

CEX is very user-friendly and easy to use systems comparing to CEX.

As of today, 99% of the crypto exchanges are Centralised Crypto exchanges. Fewer innovations and technology bottlenecks are roadblocks for DEX getting popular. Apart from the facts & questions on “Security” aspects, CEX is more popular today.

Am sure more advancements will happen in DEX to make it fly high. Please share your thoughts on CEX vs. DEX in the comments section.

Originally published at www.agiratech.com on August 8, 2018.

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The author is Ganapathi M, CEO, Agira Technologies (#agiratech, www.agiratech.com).

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