- Advantages of centralized exchanges:
1. Fast transaction matching speed
2. The page operation process is mature and the user operation is simple.
3. Assets between different chains can interact freely.
4. There are contracts and leveraged markets with high multiples and diversification.
5. OTC is convenient and quick to access funds.
6. The transaction fee is cheap.
- Disadvantages of centralized exchanges:
1. Exchanges use data to control prices. They can use water injection (additional issuance out of thin air) to manipulate the market in the background, and they can also use users' assets to smash the market. If it catches up with a few leading exchanges to work together, it will be enough to fully control the market and harvest retail investors. Imagine that retail investors use their own real money to buy and sell, and exchanges can use their own advantage of controlling the platform and use data to manipulate the market.
2. KYC certification is required, and there is a risk of personal information being leaked.
3. All the actions of traders are monitored by cex, especially the futures trading is fully monitored. They watch the data in the background to manipulate the futures market. If users are short, they will buy crazy, drive up the price, and blow up the short. trader. If there are too many long traders, they will sell like crazy until the long traders close their positions.
4. When the market fluctuates greatly, the exchange often forcibly stops the operation of the system, resulting in the inability of contract and leverage users to increase their margins in time, let alone liquidate their positions, causing heavy losses for users.
5. The new currency is online, and the exchange buys low and sells high. Before the new currency is launched, the exchange has already obtained low-priced chips. After the new currency is launched, the price is deliberately increased, and the chips are sold to retail investors at high prices, and retail investors can take orders.
6. Affected by government policies, the central team has problems, and all the money in the transaction may run away.
7. Hacking attacks, for example, on March 7, 2018, a cryptocurrency exchange suffered a hacking attack. Although they did not lose coins, the hackers also used the mechanism to cash out shorts, and many investors suffered heavy losses.
- DEX advantages:
- 1. The exchange does not control your assets. Unlike centralized exchanges, DEX does not control users' funds. On the contrary, funds are usually stored in a decentralized manner by the user or the transaction software itself. , The risk of loss is much lower.
2. To use DEX, you only need to link the wallet. It prevents KYC personal information from being leaked or sold by exchanges.
3. In the past 10 years, there have been more than 30 incidents of theft of centralized exchanges. Because DEX exists in the computer network, attacks have become more difficult. There is no single point of entry or single point of failure, making DEX security exponentially improved.
4. DEX is mainly for matching transactions and does not custody users' assets, which prevents centralized exchanges from misappropriating users' funds. I remember that this year, an exchange took the user's SUSHI to mortgage mining.
5. Realized through smart contracts, placing asset custody, matching transactions, and asset clearing on the blockchain. Users can check all their transaction traces. In many cases, centralized exchanges can only query their own transaction records for half a year. The exchange can also erase user transaction records at will.
6. The use of smart contracts to achieve a decentralized and trustless transaction mechanism solves the risks of internal operation risks, business ethics risks, asset embezzlement and other risks that seriously affect user asset security caused by human factors in centralized exchanges. - DEX disadvantages:
1. The transaction records are all on the blockchain, which is affected by the confirmation speed of the blockchain itself. The speed is slower and the user experience is not very good.
2. At this stage, the trading depth is not enough and the slippage is high.
3. Cross-chain transactions cannot be made between different chains.
4. OTC deposit and withdrawal are not possible.
5. Transaction fees are slightly higher, (Ethereum L2 can solve the problem of high fees)
- The above is the analysis of the advantages and disadvantages of DEX and CEX that I have compiled in a morning. I hope that more friends can be helped, and I hope that more friends can add new ideas, and hope that we can have more people to join. In the construction of DEX, we should trade in a fairer environment.