Scalability: CEX vs DEX

06 May 2022

When people decide between a Centralized Exchange (CEX) and a Decentralized Exchange (DEX) to trade cryptocurrency, there are many points to consider. Which is most secure, easiest to use, and provides the best features? One of the most pertinent questions they ask themselves is which platform has the most potential for future scaling.

A CEX is essentially operated by a third party who typically maintains custody of your assets while providing a broad range of trading and investing products and services. CEXs prove to be continually popular with people seeking to invest or trade in crypto because they are often designed with customer service in mind and provide access to a one-stop shop for all of your crypto trading needs.

In contrast, a DEX is simply a coded protocol that puts buyers in direct contact with sellers and vice versa. Without the overheads associated with CEXs, a DEX can offer competitive fees. In addition, the reduced requirements for Know Your Customer (KYC) and Anti-Money Laundering (AML) legislation typically provide a broader range of tradable cryptocurrency pairs.

Ability to scale

For cryptocurrency to take hold of the public imagination, crucial parts of the infrastructure must be able to scale and handle the transactional throughput needed to provide services on a global scale. If cryptocurrency exchanges are to be seen as an alternative to banking, then being able to scale is crucial to their success.

We are still a long way from being able to trust code to deal with some of the most critical aspects of our day to day life. As much as applications and computer programs are essential to our way of life, we all still take comfort from the knowledge that if anything goes wrong, there is a human at the end of a telephone line to whom we can speak. In decentralized services, code is king and ultimately judge and jury.

Rampant inflation

Until then, trusted centralized products and services will continue to dominate the market. However, that does not mean that the familiar organizations we use daily will remain in the dark ages, far from it. With inflation rampant and interest rates surging, cost-effective solutions are becoming much sought after. One of the fundamental cornerstones for adopting blockchain technology is its ability to scale without losing any quality of services. 

The scalability of blockchain technology will draw new organizations and allow for the development of additional uses of the technology.

For more information about Banxas partnerships with various CEX and DEX platforms check our Twitter.