Centralized finance is represented by the traditional money markets which work through a system of banks, institutions, brokers and at the head of the chain is the Federal Reserve or your regional Central Bank, which makes decisions on behalf of your country or region as to what its monetary policy should be. This is very much a system where human intervention is key to the overall running and efficiency of the system. It is a system that relies heavily on the humans that run it.
A system where you are reliant on other people to decide the fate of your money, how much you can take out of your own bank account. This becomes even more problematic In the case of more extreme countries like Turkey. which made a decision to ban the buying of cryptocurrencies, so it could control the whole show, and China who have created their own CBDC, government controlled digital currency, for the more effective tracking and monitoring of users’ money flow.
Relying on Third Parties
In the case of brokers, you are usually reliant on them to make the market, to take the other side of the trade, and give you fair and transparent pricing. Not always the case. And if not then you will rely on them to pass your trade on to third party liquidity providers. Take Robinhood, a renowned broker for online stock trading, during Bitcoin’s recent spectacular price surge, it literally shut up shop as it did not want to be exposed to the wrong side of that trade. Robinhood is literally now facing 80 courtcases because of that.
CEXs or Centralized Exchanges are crypto exchanges where people can engage with crypto buying, selling or exchange and they are operated in a centralized fashion. Heard of Coinbase, Binance? They are centralized exchanges, extremely popular. However, when the markets surge in popularity, these exchanges simply cannot handle it. Binance notably has more outages than can be expected to be reasonable.
Ever tried to register to a CEX? Ouch, the process is clunky and frustrating. So this is why more savvy investors are moving over to start trading on DEXs, digital exchanges and indeed many CEXs are working on developing their own DEXs.
What are DEXs?
These, unlike CEXs rely on decentralization, meaning there is no human intervention, just you buying and someone selling, or vice versa. These exchanges work directly on the blockchain, where the blockchain is responsible for verifying and authenticating every transaction. DEXs feature order books for peer-to-peer transactions or automated market maker models, they feature an interface for trading and a matching engine which matches both sides of the trades. But this is where the similarities end, as DEXs do not use their own in-house servers or IT infrastructure, but rather they pass the transactions on to the blockchain, in this way they function as aDpps (decentralized apps).
On top of this, unlike with centralized exchanges, brokers and banks, your privacy is preserved. When you register, you don’t need to give your personal details or identification information, your wallet address is usually enough for a certain tier of trading.
Direct Access to All DEXs on a single place
Some protocols also offer direct gateways to DEXs to make the engagement with these dApps even simpler and more efficient. One example is OrionProtocol which offers users direct access to a multitude of Digital exchanges. That means users do not have to open multiple accounts, and yet they can be exposed to the best pricing in the market at any one time. To do this, you simply need a wallet address, and you can start buying, selling and exchanging crypto assets including Bitcoin, Altcoins like Ethereum, Stablecoins like the USDT, and DeFi tokens like ChainLink within minutes.
In this way it’s you against the blockchain and trust me when i say, the blockchain never makes mistakes. Happy trading.