There has been a debate surrounding DEXs (decentralized exchanges) vs CEXs (centralized exchanges) in terms of their longevity. No one can argue that centralized exchanges are running the show currently, but how long will that be the case? Can DEXs beat out CEXs in terms of usability and functionality? Which type of exchange can survive regulations? Here’s some valuable insight into why DEXs can out-survive CEXs in today’s economy.
What the Main differences
The average crypto user has had some experience with a CEC in the past. Alrge platforms like Coinbase and Binance have been pivotal in enabling people to enter the decentralized economy. Even in cryptos’ earliest days, Mt.Gox and other CEXs were the only way to trade cryptocurrency. As such, CEXs have become a crucial part of the market and most crypto users have some CE they rely on for tasks such as converting fiat into crypto.
CEXs are centralized exchanges, meaning that they have corporation shareholders that are responsible for the protocol. This group can dictate what features and coins are allowed to trade on the exchange. As such, CEXs have gained a lot of power with many having a long list of requirements to qualify to trade on their platforms. CEXs can be publicly traded like coinbase as well.
DEXs are code. They are designed to fall in line with the decentralized nature of the currencies they trade. As such, they don’t have a central organization running their operations. In most instances, the users who act as network nodes, help to facilitate the execution of preset codes in exchange for rewards.
This decentralized structure means that there isn’t a single entity that can block or censor your efforts. It also means that anyone can leverage these services, unlike CEXs which require many different requirements to meet their regulatory requirements. Sadly, this approach leaves your data open for theft by hackers if there is a data breach at a later date. This risk doesn’t exist for DEX users.
Both Types of Exchanges are necessary Today
At this time, there’s still many reasons why someone would utilize both types of exchanges. CEXs are easy to use and in many instances, they are regulated, licensed, and insured. This structure is ideal for large traders and fund managers that require these protections as a minimum level of security when trading others funding.
Additionally, CEX is easy to use. They operate in a simplistic manner that until recently, was difficult for DEXs to match. However, today’s advanced DEXs look nearly identical to CEXs. Reversely, CEXs have begun taking on DeFi features as a means to become more competitive in the market. The melding of the two has created a state where many platforms offer the same feature but their main differences are the network and token.
DEXs are ideal because they offer more privacy and accessibility. There are DEXs with thousands of tokens trading. You can find rare and new projects on these networks that may never get listed on CEXs. DEXs offer flexibility, privacy, and access to more tokens than CEXs. They are also decentralized and many use a community governance system which gives you direct input on the networks upgrades and changes
Downsides of CEXs at the Moment
One of the main issues that CEX faces today is regulatory scrutiny. The SEC recently sued Coinbase and Binance for offering tokens they suspect are securities. This confusion has made CEXs more vulnerable to other issues as well. The entire fiasco is frustrating when you consider that Coinbase is a publicly traded company that got approval from the SEC for its IPO.
These large centralized platforms hold a lot of sway in the crypto economy. And whenever one gets hacked or shuts down, it can cause the market to stutter. There are instances of exchanges failing such as Mt.Gox and crypto prices remaining on the downtrend for months before rebounding.
As a centralized checkpoint in the crypto market, they are the obvious best target for regulators. These protocols have corporate offices and well-known CEOS as opposed to DEXs that were set up by anonymous developers. CEXS have executives and other personnel that need to get paid for their services as such, they pay users much less for actions.
Fees
The crazed nature of CEXs means that they need to charge more fees to cover expenses. They have additional regulatory and personnel costs. CE users should also understand that the exchange CEO or shareholders are dedicated to securing their returns versus the average user.
CEX are More Vulnerable to Regulators
CEXs are extremely vulnerable to bad press and regulatory bite back. There have been instances where countries have banned CEXs from operating. In 2017, China made this decision which ended up stunting the growth of the Chinese blockchain sector and causing billions in crypto funding to exit the country overnight.
Regulators have many options when dealing with CEXs which you should recognize. They may decide that outright banning CEXs could be too difficult. Instead, they may want to restrict it out of commission by placing limiting or ridiculous requirements that make the operation unrealistic or not profitable anymore.
For example, they could decide that every exchange has to pay a massive amount monthly as part of their listening. The main thing to consider is that because these exchanges are centralized corporations, they must adhere to these requirements or get shut down. This structure is in complete contrast to how DEXs operate. DEXs are codes that require little to no human intervention to function. The best system operates as pure code autonomously.
This structure is better suited for a global economy. It enables the network to operate in an agnostic nature which makes them more open. It also enables you to retain more returns versus using a traditional bank or savings account. Critically, the decentralized nature of these networks makes them extremely hard to regulate. Like Bitcoin, there is no CEO or office to contact. Additionally, because it’s run by global users, no one point of attack can be used to shut the network down.
DEXs Provide A Better Solution
DEXs are a better solution for many reasons. For one, they have come a long way over the last few years. Your average DEX today is packed with familiar features that make it a great tool to add to any trader’s arsenal. The META EXCHANGE is a high-performance DEX that provides an interface that looks similar to the top-performing CEXs today.
Open Enrollment
DEXs are open to anyone to use around the world. For many people, this means that DEX is the only option available to them. There is no need to worry about meeting stringent paperwork requirements when using a DEX. These networks embody the belief that access to financial services is a basic human right. As such, they don’t discriminate against users based on their race, credit history, or location. Anyone can leverage a DEX to improve their ROIs.
Regulatory Resistance
When you examine DEXs like the META EXCHANGE that are incorporated outside the jurisdiction of centralized regulators, it becomes obvious that some developers have made preparations for a scenario in which the regulatory climate changes. You can see this in the combination of value protection mechanisms added to the META 1 Coin.
The coin is the first to introduce an asset value protection system. The system was designed to ensure that all tokens were sold for their actual asset value. The reason this is important is because it prevents market dumps. It also removes the risk of the token suddenly selling for under-asset value which has been an issue for some stable assets in the past.
The asset value protection mechanism scans all META 1 Coin trades in real-time. The data is then cross-referenced to the reserves to ensure the value restrictions are met before authorizing the trade. This structure also helps to prevent whale manipulation as it eliminates the issue of pumps and dumps.
DEXs now Have More Features
The DEXs for today have a lot of features that weren’t available just years prior. Some DEXs offer everything from staking pools to peer-to-peer lending. Unite their centralized counterparts, DEXs can try new features and services. In many instances, these services are voted in by the community via governance protocols.
Open Funding for Start-Ups
DEXs are more open in terms of enabling projects to trade their tokens. For example, Uniswap, which is a very well-known DEX on the Ethereum network, enables anyone to open a liquid poll simply by depositing an equivalent amount of ETH as the token they want to offer. This process is called seeding the pool and it has helped DEXs become a popular location for startups seeking funding.
Easier to Join
Another reason why DEXs are starting to cut into the CEXs’ share of the market is their improved onboarding process. The first DEX, Uniswap, required the user to first have ETH to even enter the exchange and conduct any actions. Every action needed to have a set-aside amount of ETH to cover network gas fees. These added technical requirements made the process very confusing for people.
The META EXCHANGE and many other high-performance DEXs now offer direct fiat-to-crypto conversions. The Onramper portal is a prime example of a third-party interface that makes the process more streamlined. Users can convert their fiat into crypto in a single step rather than having to go to another platform.
The Onramp portal makes the process very easy because of its flexibility and ease of use. You can convert +50 fiat currencies to META 1 Coin and other top cryptocurrencies directly. New users don’t need to spend a lot of time learning how to first obtain crypto to enter the market. The Onramper portal is one of the easiest ways to get to trading crypto in minutes.
Protect Your Privacy
Another vital aspect that has helped DEXs continue to grow in popularity is their privacy. Since DEXs don’t take our information they are much safer from hackers. CEXs are always getting targeted for their crypto. However, they have become targeted more for their data over the last few years. There have been millions of people’s information stolen due to data breaches.
Privacy Can Protect You From Future Regulatory Issues
DEX users have the upper hand in terms of regulatory bite back because they aren’t registered. MostDEXs don’t even keep any data and don’t have anywhere to even send a request for the information. As such, it is impossible to enforce the same restrictions as CEXs on DEXs. This structure becomes more important when you live in countries where the government might come after you for your asset at a later date.
It’s All About Not Becoming a Target
CEXs have a major issue compared to DEXs in that they are always in the limelight. Major platforms like Binance and COinbase have no way of redirecting all the attention they are getting because they are new to the few centralized areas of the industry.
This focus of attention continues to bring issues to these networks as regulators seek hard targets to focus their efforts. These massive platforms are on the frontline in terms of regulatory dealings. Their sheer size and assets make them the ideal target for the SEC and other regulators who not only seek to reign in the industry but also secure some massive fines from their targets.
DEX Your Way to Safety
Unlike CEXs, DEXs are usually low profile. There are no DEXs that have the notoriety of the top CEXs at this time. However, multiple DEXs have seen massive boosts in users and now handle millions of trades daily. These platforms are taking the reins and demonstrating to the public that you can be decentralized and very effective. For these reasons and many more, DEXs have the longevity to survive this regulatory climate over CEXs.