Centralized exchanges are among the preferred gateways for crypto traders, offering a great user experience, unmatched ease of use, access to trade hundreds of tokens from almost all existing blockchains, and a simple way of converting fiat to cryptocurrency. To underline this very point, some of the most prominent cryptocurrency exchanges, including Coinbase, Binance, Gemini, Kraken, and Bitfinex, are centralized.
Yet, lurking behind the user experience and accessibility is that the ‘centralized’ nature of CEXs means that these exchanges usually retain complete control over their customer’s assets. The onboarding process is also burdensome, given that CEXs require full customer compliance with complex KYC and AML procedures before trading can commence.
Decentralized exchanges (DEXs) were introduced to overcome these hurdles while granting users complete control of their assets. By design, DEXs don’t need a centralized authority to operate; they rely on automated protocols. As a result, DEXs ensure users retain complete control of assets alongside institutional-grade security and minimal KYC and AML requirements.
Moreover, DEXs grant users direct access to the burgeoning world of decentralized financial products (DeFi), opening several passive return opportunities like yield farming, staking, lending and borrowing, and grazing, among others. Still, this advancing concept is not without its challenges. A considerable problem with DEXs is that trading and actively leveraging other available features requires complex knowledge, making it too intricate for most beginners.
The biggest hangup is DEX’s lack of support for fiat to crypto conversions, and liquidity is always a concern, which acts as a significant entry barrier for the majority of the users. Meanwhile, as cryptocurrencies continue to enter the mainstream market, governments and central banks worldwide are busy implementing new monetary and regulatory policies to control digital assets’ growing market dominance.
While the idea sounds great on paper, the fact that cryptocurrencies are still at a nascent stage makes it complicated for governing bodies to establish entirely perfect guidelines, at least for now. Pursuant to this very point, both centralized and decentralized exchanges are constantly running afoul of regulators or region-specific AML and KYC policies, hindering expansion and preventing customers from entering the burgeoning DeFi ecosystem.
Another notable aspect in the whole crypto and regulation saga is the fact that decentralization and KYC don’t usually go hand-in-hand. Then again, without KYC, most exchanges won’t be able to offer services, which will hinder mainstream adoption. This is where platforms like Polkadex come armed with answers, bringing forth the novel concept of decentralized KYC. Instead of verifying users’ personal data, Polkadex employs cryptographic proof (Proof-of-Identity) of the actual data for KYC verification.
Popular crypto exchanges like Binance are under tremendous pressure, leading to a partial shutdown of services or outright bans in several countries. A few months ago, the UK’s Financial Conduct Authority (FCA) banned Binance from operating within in country’s borders. Earlier this month, Binance made the news again as the Monetary Authority of Singapore (MAS) ordered the exchange to stop offering services and products in Singapore Dollars after a potential breach of local payment rules under the country’s Payments Services Act.
The notice from MAS marks the latest blow for Binance after already drawing scrutiny from regulators in the US, the UK, Thailand, Malaysia, Germany, and Japan, underscoring the fact that more demanding governing frameworks will be implemented worldwide to improve cryptocurrency regulation.
It isn’t just the CEXs that have come under scrutiny. Uniswap, one of the largest decentralized exchanges (DEX), is being investigated by the US Securities and Exchange Commission (SEC), given the rising regulatory interest in cryptocurrencies and digital assets, more notably the DeFi ecosystem and DEXs.
The Ideas Answering The Crypto Community’s Call For Change
Aggregators have emerged as a promising solution to the problems of CEXs, DEXs, and more onerous regulations. One of the newest innovations in the growing market, aggregators bring together trade options from centralized and decentralized exchanges into a single interface, saving users precious time while increasing the overall efficiency of crypto trading.
With the entire crypto market aggregated under a single umbrella, users no longer have to worry about signing up for multiple accounts across platforms and protocols, undergo complicated KYC and AML verifications, or manually compare charts across exchanges to arrive at the most promising strategies. DeFi aggregators allow users to retain complete control over their assets while seamlessly accumulating the best prices from across the DeFi landscape.
Of late, there has been a massive influx of aggregators into the wider ecosystem, each contributing in their way to lowering crypto’s entry barriers. Among the many available options, here are four promising aggregators that can remodel the status quo.
Unizen is a fully compliant and the first CeDeFi exchange that combines the features of CEXs and DEXs to provide an intuitive experience for both retail and institutional investors. The ‘smart exchange ecosystem,’ powered by an all-in-one protocol, handles regulatory problems, offers low fees and faster transaction speeds, and makes it extremely easy for users to start trading.
By combining the features of Binance Smart Chain, Unizen has integrated CEXs, DEXs, and DeFi products into a single platform, allowing users to access any digital asset or transfer funds between exchanges without ever leaving the platform.
One of the most significant capabilities of Unizen is its unique ability to support CeFi and DeFi applications no matter what network they are operating on. Other features include AI-driven social trade sentiment, multi-asset yield staking, cross-chain trade aggregation algorithm, Binance shared liquidity, and DApp onboarding.
Dot.Finance is a DeFi aggregator for Polkadot that aims to provide investors a straightforward opportunity of generating yields on their idle crypto assets by automatically aggregating (compounding) their interest rates.
The platform’s yield aggregator uses a sophisticated protocol to find the best investment opportunities, allowing users to find and execute profitable trades on the Polkadot network at a much faster rate.
In addition, Dot.Finance also leverages Binance Smart Chain’s DEX PancakeSwap to enhance the yield farming experience for its customers. Other notable features include an extremely intuitive user interface, fast trading speed, low gas costs, and automated compounding.
Following the recent grant funded by Polygon, Rocket Vault will be launching its new product, RocketX, a non-custodial global liquidity aggregator protocol this month, to help retail and institutional traders access the best available liquidity conditions.
Using Machine Learning (ML) and Artificial Intelligence (AI) algorithms, Rocket Vault devises vault strategies to maximize gains and minimize losses for its users while offering them high APYs. The platform is straightforward to use and aggregates up to 800 listed cryptocurrencies across CEXs and DEXs like OKEx, Binance, Bitfinex, Uniswap, PancakeSwap, and others.
The underlying algorithms identify the assets with the most upside potential and execute trades automatically while rebalancing customer digital asset holdings round-the-clock based on current market conditions.
The world’s first full aggregation protocol for crypto trading, OpenOcean, sources liquidity from DeFi and CeFi platforms while enabling cross-chain swaps. As of now, the platform offers its DeFi aggregation services for free while allowing users to connect up to 13 different wallets, including Trezor, Metamask, Ledger, and Wallet Connect. It currently supports Binance Smart Chain, Ethereum, Polygon, TRON, Avalanche and Ontology blockchains, with many more coming soon.
OpenOcean offers several customization options for gas costs, price tolerance, and other features that users can adjust according to their preferences. Not only does the platform aggregate swaps from significant exchanges like Uniswap, Curve, PancakeSwap, JustSwap, Kyber Network, and several others, but it also plans to expand into aggregating derivatives from both CeFi and DeFi, as well as lending and insurance products.
The Bottom Line
Amidst the growing number of cryptocurrency exchanges and decentralized platforms, the inherent complications of these exchanges, and the tightening noose of regulations, the concept of CeDeFi has emerged as a promising solution that can lower crypto’s entry barriers.
With liquidity aggregators like the ones mentioned above, both beginners and pro-level traders can now leverage the full potential of the entire crypto ecosystem, all without the need to shuffle between multiple exchanges to find the most promising opportunities.