If you’re working in the Crypto industry or a business based entirely upon blockchain – odds are you’ve already heard about “centralized” and “decentralized.”
But, do you know what these really are? Or, how would they influence your business? Or… what should you implement in your business?
Well, that’s what we’re going to find out in this blog. So, boost your belts, get a notebook or something to write upon, and let’s start scrolling!
Decentralized And Centralized – What’s It All About?
Before we get into the topic of decentralized and centralized, let’s learn a little about the term, exchange, first. So, it’s a marketplace where you can buy a financial instrument, a derivative, or a commodity by paying a certain amount of money.
The function of such a platform would be to ensure an orderly and fair trading environment. And, it’ll do so by integrating some sort of security and a dissemination of price-related data in place. A business can use an exchange platform to generate more capital.
Now, let’s move onto what you’re here for.
1. Centralized Exchange
As the name suggests, a centralized exchange is operated or controlled by a single authority. It’ll be responsible for executing transactions, holding ledgers, securing user data, and much more. In addition, it’ll also take care of the financial infrastructure as a whole too.
A traditional bank is an excellent example of a centralized exchange. No matter what you’re doing there, taking out some money or depositing it, the bank will look over everything.
2. Decentralized Exchange
A decentralized exchange, in essence, is the brainchild of the coveted blockchain technology. Unlike the former, it doesn’t rely upon any bank or any other central authority at all. Instead, thanks to blockchain, it can sustain itself perfectly and doesn’t require any manual inference.
Also, a decentralized exchange is capable of distributing the network entirely. It, in turn, can help everyone get an equal share of ownership without depending on a third-party entity. Any Crypto trading platform, like the crypto boom, can be an ideal example of it.
The Difference, Then?
Well, we think you’ve probably already grasped the core difference between a decentralized and a centralized exchange. However, we’ve still provided a table here regarding the same to help you understand their influence on a business. Hopefully, it’ll help you make a choice.
Topic
Decentralized Exchange
Centralized Exchange
Control
A decentralized exchange doesn’t let any 3rd party or an authority control or look over the system.
A centralized platform tends to be controlled by a single authority. It takes care of the maintenance too.
Security
A decentralized exchange is much more secure due to its less-tangible infrastructure.
The overall security of a centralized exchange is a little less-prominent. It is also quite easy to hack.
Usability
It’s a little tricky to use, even if you have some sort of prior knowledge about the system.
Using a centralized exchange is as easy as it gets, to be honest. Think about ATMs and debit cards. Yes, that’s it.
Liquidity
Making money from a decentralized currency is, indeed, difficult. So, its liquidity rating tends to be quite low.
You can get money from a centralized exchange whenever you want. Just make the request and you’ll get money almost instantly.
Transaction Speed
Usually, the transaction speed of a decentralized ecosystem is quicker than usual. It doesn’t fall under any kind of road bump as well.
The transaction speed of a centralized exchange is decent as well. But, with regards to efficiency, it doesn’t fare well against its direct rival.
So, What Should You Go For?
Honestly, it’ll entirely depend on how you want to operate in the market. If you want to look for a more secure alternative, a decentralized exchange will be key for you. However, in case you want to walk through an easier path, it’s better to opt for a centralized exchange.
Now, if you ask me, I’ll suggest you implement both of them as a whole. This way, you’ll be able to cater to both boomers and the younger generation. A safer bet for a business, right?
Let me know what you want to do in the comment section below!
Read more:
Centralized VS. Decentralized Exchange – Which One Is The Best For An SME?
