Interesting, I would have thought that Centralized exchanges would be cheaper and faster.
Cheaper because there are no block chain transaction fees. So assuming a DEX and CEX can charge the same fee structure, then CEX's should win as there is no exchange fee added to each transaction.
On chains like ETH that matters alot if you trade alot.
And same for speed. On a CEX a trade is a database update, on a DEX its a blockchain update. Hard to see how the later can be as fast as the former.
>...then CEX's should win as there is no exchange fee added to each transaction.
The other way around, the DEX should win as there is no fee at all. If you could make a decentral Ebay there would be no Ebay to take a part of your profit.
The problem with transaction fees in many blochchains is that they actually replaced the middlemen with a decentralized middlemen(s) (the miners/stakes/node operators etc.) Now you have a system operated by people who want high fees and user who want low fees. They operators cant really collude because they compete but they know low fees would hurt them all so they basically form an oligopoly without even talking with each other.
Ideal the system should be operated by the user so they would all want fees to be low. I dont know if any such system exists but I know the XRPL solved the problem by burning the fees so node operator have no incentive for high fees. This results in a typical Tx cost of less than $0.0001 USD. Any offer on the DEX is just a special transaction and does not cost anything extra. The fee is only a negative incentive so people dont spam transaction.
>And same for speed. On a CEX a trade is a database update, on a DEX its a blockchain update. Hard to see how the later can be as fast as the former.
This is true a CEX will definitely be faster with current tech and I dont know if that will ever change but for manual trading this is not really a problem. XRPL DEX executes orders about every 3-4 seconds and the consensus mechanism does not allow front-running.
Sorry I meant block chain transaction fee, not exchange fee, I mistyped the second instance.
Trustless distributed consensus is expensive - running chain validation isn't free, and there's a tradeoff where the cheaper you make it the easier it becomes to attack. That's why this stuff ends up costing more than a traditional middleman who can use a cheaper datastore and consenus mechanism.
