What sets DEXs apart from CEXs? A deep dive featuring crypto traders and developers

Published on by Cryptoslate | Published on

Decentralized exchanges, or DEXs as popularly called, are one of the hottest topics in the crypto space in 2020, growing from niche obscurities as early as 2017 to boasting billions of dollars in daily volumes across 100s of crypto trade pairs this year.

Non-custodial trading, low-fees, full control over fund transfers, and the absence of KYC compliances mean a trading environment more suited to the ethos of cryptocurrencies: That of privacy, inclusivity, and finances not controlled by any particular state or company.

These include Tokenlon, a fast and secure decentralized exchange powered by 0x protocol uses Request's For Quote architecture to bring decentralized liquidity to the masses, Matcha, also known as the "Robinhood of DEXs" built by 0x Protocol that aggregates liquidity from 0x, Uniswap, Kyber, and Curve, the leading RFQ market maker that provides DeFi traders with the best price on every token swap.

DEX stakeholders told CryptoSlate about the various trading features that make DEXs a top competition for the future, including how their presence helps the broader DeFi movement.

"As more and more decentralized finance use cases emerge, more users will start to keep their funds in their wallets. DEXs allows traders to trade right from the wallet, without the need for deposit or withdrawal. Although centralized exchanges have their edge, they cannot compete with DEXs on these two fronts."

"The three biggest features that we believe set DEXs apart are global accessibility, non-custodial trading, and access to any tokenized market," Robbins said.

Traders on the features that are most important to them.

The DEX teams spoke with traders who used their platforms about what features and elements made trading on non-custodian solutions better than using a CEX. A trader, who wished to remain anonymous, said, "Safety is not the most critical factor for me. I have used a centralized exchange for several years, and I have not encountered an asset loss event. However, the convenience of decentralized exchanges is a significant advantage. Because I participated in DeFi mining, my tokens are stored in my wallet. When I want to trade, I can trade directly in the wallet without transferring to centralized exchanges."

A professional market maker - an individual or entity using algorithms to continually provide liquidity to the market - working on Tokenlon said, "For some trading pairs, the liquidity on a DEX is already comparable to that of centralized exchanges. We are market making on both DEXs and CEXs, so we have witnessed the incredible improvement in DEX's liquidity this year."

"We believe the trend will continue, and traders who trade on DEX will no longer need to make a sacrifice in liquidity soon."