Will Centralized Trading Platforms become the Majority Choice of Crypto Traders?
Whilst juggling through the crypto journey, a new obstacle pops up whether to go for centralized exchange or decentralized exchange. Before deciding or rather justifying for centralized exchange, let’s understand how they differ.
How are Centralized and Decentralized Exchange different?
Centralized exchanges have an intermediate i.e. the exchange provider which charges commission (trading fees) to fulfill your order. Whereas decentralized exchange does not have any intermediary’s, hence almost negligible trading fees. Centralized exchanges are regulated, hence you can find the physical address and contact the provider in case of any dispute. On the other hand, decentralized exchanges are not regulated and usually, the developer’s details are not easily disclosed. Talking about the trade, centralized exchanges will match the orders and fulfill them. However, decentralized exchanges will initiate a meeting between the matching buyer and seller.
Centralized exchanges will require authentication documents from your side (KYC) and in case the case of decentralized exchanges there is probably no need for such verification. However, you may need to prove your identity to the person you trade with. Decentralized exchanges just act as a medium and do not actually hold your funds.
Thus, a decentralized exchange is a peer-to-peer medium of trading between the buyer and seller whereas centralized exchange offers a regulated and facilitated platform for trading.
How will Centralized Exchanges be a Popular Choice?
Reading the above differences, you might think that decentralized exchanges are better to use. Because you have just got the overview. When you think deeper, it weighs less than its centralized fellow. Let’s see how:
Proper Liquidity to Trade
The basic use of exchange is for trading. And for trading better liquidity is a must. Decentralized exchanges are still new to the world and do not have an ample number of users. This less number of users results in lower trading volumes. You’ll have to wait longer to get your buy/sell order matched. It will be difficult to process the trade at the desired time. Thus, not giving you expected returns.
Advanced Trading Facility
Some of the advanced trading facilities like margin trading and stop loss are unavailable on decentralized exchanges. You as a trader is likely to have a hard time while trading.
Chances of Fraud
It feels palatable when you don’t have to prove your identity online. But what about authorization of the opposite party while trading on a decentralized exchange? You have to prove your identity at that time. And if you fail to verify, there are all the probable chances of fraud present.
New learners feel more comfortable trading on centralized exchanges as they are easy-to-use. Decentralized exchanges do not offer a simple interface and make it troublesome for newbies to try their hands on cryptocurrency trading.
The comparison doesn’t strictly portray decentralized exchanges as awful. These points just mean to justify that centralized exchanges will still be a popular choice among a majority of the traders. To add one more proof Encrybit, an upcoming centralized cryptocurrency Exchange conducted the survey and found that a majority of the participants have answered in the favor of centralized exchanges as their most likable exchange.
As decentralized exchanges are still in its roots, people suggest that it is likely to overcome in future. But for now, centralized exchanges are the first choice.