Crypto Academy | Homework | Topic |||: Comparing and Contrasting between Centralized and Decentralized Applications. [Task by @yohan2on]

Introduction

Exchange refers to an open, organized marketplace for commodities, stocks, securities, cryptos, and other financial instruments. Exchanges serve a huge role in the crypto space and in extension other financial because they serve platform connecting buyers and sellers. However, over the years various comparisons have been drawn between centralized exchanges and decentralized exchanges. Since the birth of cryptocurrencies, centralized exchanges have been in charge of almost 100% of asset liquidity in the crypto space. Exchanges like Binance, Poloniex, Huobi, and coinbase have been spearheading these changes with large market cap and colossal 24hrs volumes. However, despite the many advantages of centralized exchanges like quick access to fiat currencies and ease of use, the system has been subjected to series of attacks and loss of investors' funds.

Following the fame of centralized exchanges, another type of exchange is quickly gaining recognition and making waves in the crypto markets. 2020 was truly the year for decentralized exchanges as it grew to mass adoption and an alternate marketplace for purchasing cryptocurrencies. With the launch of famous dexs like Uniswap, dYdX, Balancer, polidex, and Curve, These DEXs have quickly taken the defi tokens to mainstream adoption as a center stage Defi markets. With optimized usability, deeper liquidity, and emerging composability, the DEX ecosystem is as strong as ever. This explosion on dexs has revolutionized a much-needed competition between the centralized exchanges, as they aim to capture a substantial share in various markets.

In this assignment, I will be analyzing both marketplace and my honest opinion on which I prefer and why I have chosen to use it.

Decentralized Exchanges(DExs)

A decentralized exchange is one in which no centralized authority stands between two or more individuals involved in a transaction, DEX is an innovative type of exchange platform that allows people to make transactions without any intermediaries. They can place orders and find each other, with total control of their assets. This is the main difference between Dexs and Cexs, otherwise, both platforms serve as a marketplace where crypto-assets can be purchased and sold at customers' wish.

In place of centralized intermediaries smart contracts are used instead to run and execute trades between buyers and sellers, these self-executing smart contracts serve as a replacement to centralized exchange managers.

Below are the major benefits of Decentralized Exchanges.

As a non-custodian platform, ownership of underlying assets is never revoked.

The dex system is very cost-efficient with transactions amounting to almost nothing, allowing users to cross swap assets and coins in a decentralized manner.

Due to its decentralized nature, Dexs is very safer when compared to centralized exchanges, they also have a lesser probability of having serious technical issues. Some nodes may go down, but the whole system will keep functioning.

Most DEXs do not require any sign-ups and largely come with no counterparty risk. Dexs are completely anonymous and free of a paper trail as users you only need to use your public address. Users simply connect a wallet of their choice to start buying and selling crypto. No profile or background information is required.

Greater flexibility in terms of the listing, purchasing, and selling less-mainstream tokens.

A lesser need to trust a central authority like a central bank or a centralized exchange to manage assets appropriately.

Democratic consensus mechanism(Democratic decision making)

Dexs are great and are becoming rapidly adopted especially with the way algorithm-governed decentralized exchange known as automated market makers (AMMs) are handling transactions right now. But I will always prefer Centralized exchanges because of their leverage on the following cons below.

Transactions are particularly slow and lack efficiency because every transaction will be confirmed by every node in a blockchain

Poor scalability.

Zero crypto to fiat gateway, only supports crypto to crypto transactions.

Poor customer care support.

Centralized Exchanges(CExs)

Centralized exchanges are the direct opposite of decentralized exchanges and hence any feature of dexs exchanges always go the other way over here,hence a Centralized exchnage is:
An exchange with a centralized authority who call the shots of what happens, this involves intermedaries such as exchange manager who collects funds from a seller and matches it to a buyer. On centralized exchanges, customers are ultimately trusting that the managers of the exchange with their funds, they trust that the managers will manage and will return their funds when they request them, and that they are not misappropriating deposited funds in any way.

Below are the major benefits of Centralized Exchanges.

Centralized exchanges have the fastest transaction speed and could execute trades in milliseconds.

Centralized exchanges are very scalable and function effectively even during times of high load and stress as they run on centralized servers and architectures.

Centralized exchanges are usually open to disclosing information as their team members and public headquarters are disclosed to the public.

Regulatory compliant.

Centralized are much easier to use with a simple UI interface and heavy Liquidity

Centalized exchanges provide a Fiat to Crypto Gateway for its customers who wish to buy cryptos using local currencies like USD, and NGN.

Some of its limitations include-

Centralized exchanges have experienced few attacks and millions looted, however most exchanges have zero successful attack.

Lack of Censorship Resistance and Transparency

Nevertheless Centralized exchabgs will alsys be my number one choice whenwve i wish to trade my cryptos, great excnages like Binnace, Huobi and Poloniex has been consistent in delivering its services whenever i need it. The user interface and lots of other services from exchanges are part of what makes them special to me.
Thanks to crypto-professor @yohan2on and worth to be mention:
@steemcurator01, @steemcurator02 and @steemitblog