As the Cryptocurrency world continues to grow, crypto enthusiasts are simultaneously moving to platforms that give them anonymity. This is why we have seen a high inflow of decentralized exchanges compared to centralized exchanges. The fact that there is a Know Your Customer verification in centralized exchanges has also discouraged people from using CEXs.
Nevertheless, most investors still use Centralized exchanges because it offers them an easy way to move from Fiat to Cryptocurrency. Again, there are features such as Future trading which are not yet available in Decentralized exchanges. People have to use Centralized exchanges to trade it.
I cannot forget to mention that there are now decentralized exchanges where one can convert from Fiat to Cryptocurrency. There is also a limit order book in decentralized exchanges. This means that in years to come, decentralized exchanges will have almost all the future that is keeping people in centralized exchanges. We can now ask, what then will be the fate of centralized exchanges when this happens?
First, we need to understand that there are varieties of choice. Some people are comfortable with centralized exchanges because they believe it is safer for them. They do not need to border on smart contract exploit and any tokens on a centralized exchange can't be easily rugged. Furthermore, the fact that using centralized exchanges is easier compared to decentralized exchanges where you have to approve smart contract calls now and then is another reason why people will stick with CEXs.
I strongly believe that Centralized exchanges will remain despite the centralized nature of the exchange. I think people will only look for reputable exchanges to stick with. Talking about reputable exchanges, Binance is one such exchange with not just an easy-to-use interface but also good proof of reserve.
I believe people will use either decentralized exchange or centralized exchange based on their wants.
Decentralized exchanges may offer anonymity but it still has drawbacks especially when it comes to security. The use of Smart contracts in decentralized exchanges is prone to exploits. The continuous approvals and paying of fees for every transaction is another challenge. You can imagine paying double fees when using a decentralized exchange; the 0.20 to 0.25% fee from the exchange and the transaction fee for the miners that will process the transaction.
In the end, I think both centralized and decentralized exchanges need to co-exist to offer people varying reading opportunities. The coexistence will drive competition which will force the exchanges into providing the best service. So, in the end, the user is on the gain side because he will have varying options to choose from.
That's it from DigitalJoseph this morning. If there is any topic you want me to write on, kindly drop it down the comment box and I will look into it.
Curated by @ultravioletmag