In the cryptocurrency field, a centralized exchange (CEX) is an online trading platform that allows people connected to the Internet to buy, sell, and exchange cryptoassets. It is usually held and operated by an individual enterprise, and the operating procedures must comply with the laws and regulations of the place where it operates. CEX generally requires users to register and open an account to participate in transactions, and most CEXs require identity verification to meet local "Know Your Customer" (KYC) and Anti Money Laundering (AML) requirements, thereby ensuring the safety of users' funds.
Since dwdollar founded the first Bitcoin exchange, Bitcoin Market, in 2010, and today the vast majority of cryptocurrency transactions are completed on centralized exchanges, centralized exchanges have gradually become one of the most important infrastructures in a decentralized world.
Convenience of DEX
Corresponding to Cex is the decentralized exchange DEX. Like centralized exchanges (CEX), the purpose of decentralized exchanges (DEX) is to allow customers to trade their own encrypted assets. The difference lies in the operating principles of the two.
Decentralized exchanges (DEXs) do not have a central authority to track order books and match orders. Depending on the trading mode, DEXs can be divided into two types.
One is based on the Orderbook order book model, where the matching of custody and transactions is completed off-chain to solve problems such as slow on-chain transaction speed, insufficient depth, large slippage, and unpredictable losses. This model is used by Loopring (Loopring protocol), 0x, etc.
The second is based on the AMM automatic market maker mode, which supports real-time human-machine trading . Anyone can be a market maker, which greatly increases the depth of trading and solves the drawbacks of on-chain trading. It is also a widely used mode at present.
Among them, the AMM automatic market maker model needs special introduction. After years of development and evolution, the AMM automatic market maker model has been proven to be one of the most influential DeFi innovations.
Decentralized exchanges (DEX) have significant advantages over centralized exchanges (CEX) in terms of decentralization, autonomous control, privacy protection, security, trustless transactions, global and uncensored nature, innovation and openness. These characteristics make DEX uniquely attractive in providing decentralized financial services and protecting user privacy.
Why can't we live without CEX?
In theory, decentralized exchanges can replace centralized exchanges in terms of operational philosophy, openness, and trading convenience, becoming the preferred choice for crypto users. However, as of today, cryptocurrency trading channels are still concentrated on centralized trading platforms. As of March 2023, the derivative trading volume of centralized exchanges accounts for 72.7% of the entire cryptocurrency market, with Bianace alone accounting for 64% of the market share. At the same time, top exchanges account for 92.2% of the total spot trading volume. In terms of scale and market share, centralized exchanges are still one of the most important platforms in the cryptocurrency world.
The core competitiveness of a centralized exchange is its functionality . It not only meets the different needs of users through diversified functions, but also cultivates user habits and stickiness through unique functions. At the same time, centralized exchanges provide different tutorials and guidance as well as multi-client experience, which greatly reduces the threshold for new customer engagement in the crypto industry.
1. Convenience
4. cryptocurrency pricing
Since dwdollar founded the first Bitcoin exchange, Bitcoin Market, in 2010, and today the vast majority of cryptocurrency transactions are completed on centralized exchanges, centralized exchanges have gradually become one of the most important infrastructures in a decentralized world.
Convenience of DEX
Corresponding to Cex is the decentralized exchange DEX. Like centralized exchanges (CEX), the purpose of decentralized exchanges (DEX) is to allow customers to trade their own encrypted assets. The difference lies in the operating principles of the two.
Decentralized exchanges (DEXs) do not have a central authority to track order books and match orders. Depending on the trading mode, DEXs can be divided into two types.
One is based on the Orderbook order book model, where the matching of custody and transactions is completed off-chain to solve problems such as slow on-chain transaction speed, insufficient depth, large slippage, and unpredictable losses. This model is used by Loopring (Loopring protocol), 0x, etc.
The second is based on the AMM automatic market maker mode, which supports real-time human-machine trading . Anyone can be a market maker, which greatly increases the depth of trading and solves the drawbacks of on-chain trading. It is also a widely used mode at present.
Among them, the AMM automatic market maker model needs special introduction. After years of development and evolution, the AMM automatic market maker model has been proven to be one of the most influential DeFi innovations.
Decentralized exchanges (DEX) have significant advantages over centralized exchanges (CEX) in terms of decentralization, autonomous control, privacy protection, security, trustless transactions, global and uncensored nature, innovation and openness. These characteristics make DEX uniquely attractive in providing decentralized financial services and protecting user privacy.
Why can't we live without CEX?
In theory, decentralized exchanges can replace centralized exchanges in terms of operational philosophy, openness, and trading convenience, becoming the preferred choice for crypto users. However, as of today, cryptocurrency trading channels are still concentrated on centralized trading platforms. As of March 2023, the derivative trading volume of centralized exchanges accounts for 72.7% of the entire cryptocurrency market, with Bianace alone accounting for 64% of the market share. At the same time, top exchanges account for 92.2% of the total spot trading volume. In terms of scale and market share, centralized exchanges are still one of the most important platforms in the cryptocurrency world.
The core competitiveness of a centralized exchange is its functionality . It not only meets the different needs of users through diversified functions, but also cultivates user habits and stickiness through unique functions. At the same time, centralized exchanges provide different tutorials and guidance as well as multi-client experience, which greatly reduces the threshold for new customer engagement in the crypto industry.
1. Convenience
- Multi-chain asset trading convenience : Centralized exchanges support mainstream tokens on different chains, and users can easily exchange multi-chain assets without complex cross-chain operations through cross-chain bridges.
- Internal trading : Since the internal operation of the centralized exchange is not on the chain, transactions do not need to pay on-chain fees, and there is no risk of delay and rollback. Users can flexibly conduct high-frequency trading.
- Deep trading market : Centralized exchanges have much higher liquidity and trading volume than decentralized exchanges, with greater trading depth and lower spreads. Established exchanges attract a large number of customer engagement transactions, further improving liquidity.
- Fee-free trading : Some centralized exchanges do not charge fees for trading specific cryptocurrencies, further promoting active trading levels.
- Low usage threshold : Centralized exchanges have optimized the interface and User Experience, allowing users to easily trade cryptocurrency like using traditional financial software. Simply register with a mobile phone number or email and pass KYC verification to trade, without the need to master complex cryptocurrency knowledge.
- Low trading threshold : Users can conveniently trade derivatives on centralized exchanges that support derivatives trading. Through margin lending and other methods, users can trade contracts without additional collateral, simplifying the trading process.
4. cryptocurrency pricing
- Market Pricing Mechanism : As the vast majority of transactions are concentrated on centralized exchanges, their trading process directly affects the pricing of virtual currencies. Arbitrage robots maintain the price difference between different exchanges within a small range, ensuring the consistency of market prices.
- Oracle Interface : Oracle interfaces and solutions provided by centralized exchanges have impacted many projects on the chain, including decentralized exchanges and DeFi projects, further solidifying their key role in cryptocurrency pricing.
- Traditional trading tools : Centralized exchanges provide traditional trading tools such as chart analysis tools, floating window monitoring, IOS widgets, etc., to help users conduct market analysis and quickly obtain trading information.
- Strategy Robot : Provide automated trading tools, such as grid trading robots and trading copy systems, which reduce the difficulty of novice trading, optimize trading strategies, and improve trading efficiency.
- Perfect guidance system : Centralized exchanges usually provide detailed official guidance, QA system and human customer service to help users solve problems in use. When a new function is used for the first time, the mobile end App will automatically provide brief guidance to reduce learning costs.
