What’s the Difference Between Centralized Exchanges Like BigONE and DEX’s?

What’s the Difference Between Centralized Exchanges Like BigONE and DEX’s?

In simple terms, there are two types of crypto exchanges, centralized exchanges (CEX) such as BigONE, decentralized exchanges, or DEXs for short. The key distinction between CEX and DEX from the user’s standpoint is the means of asset custody. CEX is a centralized custody system where users have no private keys or actual control over the assets, the exchange holds the asset that is being exchanged.

DEX asset transactions occur through trustless smart contracts, in which users control their private keys and their assets. A crucial distinction between CEXs and DEXs is whether on-chain audits can occur from a regulatory standpoint. CEX runs on a separate database that is not listed on the blockchain and cannot, therefore, be audited. In contrast, every DEX transaction is recorded on the blockchain and audited. CEXs come with a full set of services and activities and low transaction costs in the current market. DEXs on the other hand do not require KYC and do not have high transaction costs either.

Comparing transaction processes

A centralized exchange’s primary services are deposit and withdrawal, order placement, order matching, and fund settlement. In contrast, DEX has all these services on the blockchain. Furthermore, it performs all operations via smart contracts so that the user’s transaction process does not require the participation of any trusted third party. However, there are pros and cons to using both exchange types.

CEX process (BigONE exchange):

• To access the exchange, the user first registers for an account and creates a password. Then, when a user needs to deposit tokens, they can use the “fiat currency” menu to purchase cryptocurrency or use their wallet address to fund their deposit address. All tokens are automatically transferred to the deposit address.
• When a user wants to make a transaction, he or she must send a transaction request to the exchange. The exchange’s centralized server begins the transaction matching and notifies the user of the outcome after the transaction is completed.
• Users can submit withdrawal instructions to the exchange when they have withdrawal requests.

As seen in the preceding steps, all coins are held on the exchange, so the withdrawal process is from the exchange address to the user’s electronic wallet address. In addition, users normally also must comply with KYC and AML procedures to access a full range of CEX services.

DEX process:

• The user holds their private key after he or she creates an address on the DEX exchange, which means the platform operators have no authority or ability to obtain the user’s private key.
• Transaction orders are submitted via authorized smart contracts, and the submitted orders are collected into the DEX exchange’s order pool for other users to view.
• When other users locate an order with a suitable price, they can execute it and submit it to the DEX exchange’s server. When the confirmation is correct, the relevant transaction information is uploaded to the chain, and a smart contract completes the transaction process.
• The order is passed from the order pool to the user executing the order before being submitted to the server and executed off-chain. The last step is the final execution. The system will notify the user that the order has been completed once the last step has been completed.

The difference between BigONE cryptocurrency exchange and DEX

In terms of asset security

The users’ funds are all stored on BigONE’s exchange wallet. Therefore, it is simple to attract hackers due to a large amount of money found in one place. When a problem occurs, almost all users will suffer losses as a result; that said, top CEX exchanges such as BigONE use various platform stability methods to guard against this. To maximize the security of user assets, we use the latest technology to ensure our platform’s security. We also provide high-quality customer service, with official verification procedures and other security systems to prevent abnormal activities.

The assets of users on the DEX platform are managed by smart contracts rather than on the platform side. The platform operators do not touch the user’s assets during the transaction, and the user’s investments do not need to be deposited to the platform. All the user’s transaction operations are point-to-point. The trader makes transactions using a private key. The smart contract will verify the match and transfer the assets directly if the match is successful. There is no need to withdraw money from the account wallet, and the platform is only in charge of transaction flow. However, protecting the security of users’ assets is a challenge. It is still up for debate whether CEX or DEX’s assets are more secure, but with the gradual advancement of technology, CEX’s security has significantly improved.

In terms of asset control

The platform will control user assets in a CEX, and users must deposit their assets to the trading platform’s wallet. The centralized trading platform’s asset custody function functions similarly to a bank. First, the money is deposited in the bank by the user. Next, the bank opens an account for the user to record the user’s funds. The bank has complete authority over and responsibility for the user’s funds. Of course, the user has the option of selecting which bank to use. After completing each transaction, the funds are withdrawn to their wallet, like a DEX. DEX users have complete control over their assets, and the DEX operator is not responsible for the security of their assets.

In terms of transaction speed

Because the transaction data is not on the chain with a CEX, the transaction speed is extremely fast if there is a matching counterparty, the other party that participates in the transaction. The blockchain fully supports DEXs. Every transaction order will be recorded as a transaction in the blockchain network, which frequently results in low liquidity, high costs, and slow speed.

CEX exchanges, such as BigONE, provide a positive user experience, with benefits such as increased trading depth and faster trading speeds. CEXs also have many more users than DEXs, and CEX exchanges offer a wide range of leverage, futures, and other financial services. As a result, despite the rival advantages of decentralized exchanges for peer-to-peer transactions, the most popular crypto exchanges are centralized.