It’s no secret that vast majority of the cryptocurrency world has been in favor of decentralization over centralization. In fact, that’s one of the foundational pillars of the nascent asset class. But are decentralized exchanges really better than centralized ones?
Ethereum co-founder Vitalik Buterin, in an interview with TechCrunch, recently made the bold assertion that centralized exchanges go “burn in hell” — as he believes the primary purpose of centralized exchanges is to provide a bridge between the worlds of cryptocurrencies and fiat currencies. Centralized exchange are, of course, currently the norm — but Buterin hopes to see that fact change in the near future.
On the other side of the spectrum is Binance CEO Changpeng Zhao, who disagrees with Buterin. Recently, Zhao answered Buterin’s complaints on Twitter while suggesting that Vitalik should be more appreciative of the fact that centralized exchanges are part of an ecosystem, rather than independent parties.
According to Zhao’s tweet, fiat had and still likely still has an important role in the development of decentralized digital currencies and tokens. If not for centralized exchanges and fiat currencies, liquidity would be minimized and the industry would stagnate.
Zhao also noted that decentralization is inherently safer in name alone. In the cases of Ethereum Classic and Ethreum DAO, the decentralized organization more-or-less failed to protect itself. Thus, is freedom not more important than decentralization?
Nevertheless, decentralization has become a borderline-mainstream fad — but many individuals are not truly aware of how it works and whether or not it actually equates to complete freedom. So, the question is: Are decentralized exchanges better?
The End Goal
First and foremost, let’s get one thing straight: most cryptocurrency exchanges cannot compete with more traditional equity trading platforms in terms of speed of execution, sophistication of order management, quality of API, efficacy of risk control, and other factors.
In the case of decentralized platforms, specifically, they provide direct exchange between transacting participants, but do not bring in profits — hence, their growth potential is