DEX on the rice and CEX on the decline, according to a report
According to a new report from City (C) over the last two years, DEXx has shown more growth than their rivaling CEXs. Can we find out why?
DEX vs CEX
First, of all what is a DEX or a CEX? Both of them basically do the same thing. Allow you to swap crypto for other cryptos. But the main difference between them is the way you do it. The D stands for Decentralized while the C stands for Centralized. The EX stands for EXchange in both cases.
And in thinking about how they work it can help to use an analogy. With a CEX we can think of how they work as a normal bank. In order to use them, you need to be a customer. And in order to become a customer, there is a registration process and a vetting process. What is usually referred to as a KYC, Know Your Customer.
While a DEX works more like a big marketplace or a bazaar. You can walk around and do a trade with one of the many sellers. There is no need to register or do any vetting. You can just show up, find what you want to trade for, do the trade and leave.
Why are DEXs on the rise?
One of the biggest reasons is what is known as "not your keys, not your crypto". And it basically boils down to the fact that you transfer your crypto onto the CEX in order for you to use it. Meaning you are no longer in direct control of your crypto. In a similar way, you can not directly control your savings in a bank account.
And with the recent foreclosure of bog companies like Celcius and Voyager. People how have begun to question if this is such a good thing. While the banks have government protections that guarantee the users, you, their money back if anything happens. There is no such guarantee with crypto.
And with so many examples in a short time span of how users get locked out from accessing their crypto, this was probably only a matter of time before it happened.
In July this year, it was reported that Uniswap, by far the largest DEX, had equaled Coinbase in daily trading volume. Their CEO was quick to respond saying they have many more features than just trading.
https://twitter.com/brian_armstrong/status/1549254401155469322
Hopefully, this will lead to continued growth for DEXs in the future as well. And the report says that a potential driver for people to start using DEXs more in the future is the possibility of regulations. As the regulations are basically sure to tighten up the KYC process and registration process for CEXs in the future.
Unfortunately, I was unable to find the original report, despite looking for it for quite some time. =(
What is your thought on this report? Do you see this as good news? Or is it of little to no consequence? Please sound off in the comments down below. If you would like to support me and the content I make, please consider following me, reading my other posts, or why not do both instead.
See you on the interwebs!
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