CENTRALIZED VS DECENTRALIZED EXCHANGES, WHICH IS BETTER?

Undoubtedly, the most decisive moment for every project irrespective of the model (ICO or airdrop) is getting listed on exchange platforms. To vast majority of crypto traders and enthusiasts, the kind of exchange a particular token or coin gets listed on is a significant factor that predetermines its price, trading volume and or recognition in the crypto market. In recent times, we’ve witnessed a tremendous increase in the number of centralized exchanges within the crypto ecosystem, just as much as the decentralized ones. Just a quick ‘recap’, centralized exchanges are privately-owned exchange platforms such as (Binance, Bittrex, Mercatox, FatBtc, HitBtc, Kucoin etc), developed by individual (a project or an organization) which requires users to sign up an account with them before usage while decentralized exchanges on the other hand, are exchange platforms for all; most common are the exchanges for ethereum-based tokens (Etherdelta, Forkdelta, Idex, Ddex, etc) and the waves DEX. For a decentralized exchange, account registration isn’t a requirement and thus might seem the first advantage over the centralized ones.

Quite a number of projects go through the hazzle of getting listed on centralized exchanges even though it is a lot easier to list on the decentralized ones, why? Most users in the crypto ecosystem are always on the lookout for projects getting listed on the likes of Binance, Kucoin and others, on a rare occasion have I seen such agitation for projects to get listed on the decentralized exchanges; why? Are centralized exchanges better?

Below is a brief highlight of the differences between the centralized and the decentralized exchanges and why some projects would rather prefer one over the other.

First of all, listing on a centralized exchange cost ‘fund’, the renowned Binance charges as high as $2million for exchange listing and Mercatox charges 2BTC while decentralized exchanges on the other hand offers free or close – to – free listing on their platforms. The exuberant fees charged by these exchanges is a discouragement to projects airdrop-based projects which couldn’t offer the required amount, thus finding decentralized exchanges as alternatives. So if I were a developer, which would I prefer?

On a brighter side, the listing fee is probably the drive that pushes the price of tokens higher on centralized exchanges compared to the decentralized. Aside the higher trading price is trading volume, it is not surprising that tokens listed on centralized exchanges experiences higher trading volumes than the decentralized – listed tokens, this alone is enough to drive the price of tokens as the interplay of the forces of demand and supply tend to give it the needed boost.

However, user experience – wise, trading or keeping assets on centralized exchanges over time have left users with a wave of mixed – experiences. Few weeks ago, about six different centralized exchanges (Bithumb) inclusive were subjects of cyber attack, and the users made to lose billions of dollars in assets. I wouldn’t keep my asset in an exchange where security of my funds isn’t guaranteed. This is probably the major disadvantage of trading on a centralized exchange.

Still on security of funds, individual users’ account can be compromised during the course of transaction or assessing the account, though majority of these exchanges offer individual the opportunity to tighten the security of their accounts binding it with google 2FA, still it seems not 100% enough to barricade their accounts from sabotage. However, security of funds is not an issue of concern when trading on a decentralized exchange.

Thus, whether to list or trade on a decentralized exchange or centralized, the decision is the prerogative of the force behind the project (token) and the desire of the project owners.