Using an exchange involves a number of risks. These have names: settlement risk (such as price collusion); custody risk (absconding with user funds); information asymmetry (more price collusion) etc.
To blame centralised exchanges for such things is moot. FTX may serve as a beacon of mismanagement and incompetence, but defi protocols are also subject to rampant manipulation.
The article below suggests ways of mitigating some of these issues.
A market mechanism I’ll introduce below solves these problems. It has no custody risk or settlement risk, and trader information is available only to the respective traders themselves.
The underlying type of market here is generally referred to as a “call market.” Such periodic auction markets are, for instance, used today in Nasdaq’s opening and closing periods.
How Exchanges Can Be Free of Risk
David Chaum, a pioneer in cryptography and in privacy preserving and secure voting technologies, is the creator and founder of the xx network. In 1995 his company, DigiCash, created and deployed eCash, the first digital currency, which used Chaum's breakthrough blind-signature protocol.
It's an interesting read, but I wonder how effective it would be with low volume markets. The protocols used to both the trader's wallet and identity are interesting, though.
So, it is possible to have central control yet algorithmic and decentralised operations. ;-)
That's also kinda DARPA research area. lol.