Hybrid Crypto Exchanges: The Perfect Blend of DEX and CEX Solutions
Cryptocurrency exchanges arose from the need to trade digital currencies, just like in forex trading. If one wishes to change hard currency into digital currency, they do so by using crypto exchanges to acquire such assets as bitcoin stored in digital wallets.
Types of Crypto Exchanges
However, despite their unprecedented growth and infiltration into markets, cryptocurrencies cannot replace conventional and traditional platforms. This necessitated a look into how physical platforms could be incorporated with cryptocurrencies. Thus, centralized and decentralized exchanges emerged.
Centralized Exchanges (CEX)
Centralized exchanges are those that involve an intermediary to facilitate transactions between buyers and sellers. The intermediary charges transaction fees and oversees the process to make sure it follows local regulations.
Centralized exchanges are governed by a singular authority, which makes them vulnerable to hacking and tampering. Trades are conducted in high volumes and high liquidity, both of which are significant advantages. The disadvantages of this exchange are the risk of hacking, indirect ownership of funds, and little transparency.
Decentralized Exchanges (DEX)
Conversely, decentralized exchanges are just like Bitcoin, where no third party is involved, and the seller and buyer can interact directly. This exchange operates in a decentralized fashion; without a central authority, thus supporting peer to peer trading. Unlike centralized exchanges, these provide users with anonymity and security, which a lot of people prefer. The user also has full control of their funds.
It also allows for excellent transparency, since ledgers of transactions are available for anyone to check. This, in turn, prevents tampering and hacking of the records or any form of corruption.
Its disadvantages are that the need for anonymity and security make for slow transactions and low volume trade. They do not have to follow the rules due to autonomy, which allows for malicious and illegal activity. Decentralized exchanges include Bitshares, Rudex, WavesDex, SIBEX.
These two significant types of crypto exchange paved the way for the creation of a hybrid system that was preferable. This system leverages the advantages of both exchanges while reducing the disadvantages of the same to create a high functioning exchange.
As the name suggests, this exchange is a combination of both centralized and decentralized exchanges. The user decides whether to trade with or without an intermediary and have complete control over their funds.
Hybrid crypto exchanges specifically take advantage of dependability and fund liquidity by CEX and the security and anonymity of DEX. They are of significant interest to individuals, corporations, private investors, and entities looking to tap into cryptocurrencies.
The idea of a hybrid crypto exchange is relatively new, with just a number of them either operational or in the beta testing stage. Some of the features of a hybrid crypto exchange include:
- Management of liquidity – an advantage drawn from centralized exchanges, this allows an increased flow of crypto trading.
- Secure transaction – this borrows from decentralized exchanges, which assures customers that their operations are taking place in a highly secure environment.
- High performance – the combination of CEX and DEX advantages certainly improves performance one would get from either of the exchanges.
Benefits of Hybrid Exchange
By incorporating CEX features, third party operators are introduced to a platform that once enjoyed autonomy. The advantage of a hybrid exchange is that customers have more control over their funds, as opposed to control exercised by third parties in centralized exchanges.
One major issue with decentralized exchange is that its autonomy and lack of central authority opens it up to the malicious activity. With hybrid exchange, regulations of cryptocurrency are introduced and followed, making them more legitimate.
Funds are stored in hot wallets in a centralized exchange, which is very vulnerable to illegal access and hacking. A hybrid exchange negates this risk by providing tamper-proof wallets for cash storage, making it difficult for them to be hacked.
- Speedy Transactions
Decentralized exchanges are slow in processing transactions, but they provide transparency for validity and proof. With hybrid exchanges, transactions are speedy, and the added advantage of transparency from a decentralized exchange is maintained. This makes the hybrid exchange very attractive for traders.
Hybrid exchanges are highly scalable, which will allow for any volume of trading soon. It is predicted to be the future of crypto trading, and its scalability and reliability are poised to make it very successful.
Hybrid exchanges are also cost-effective because they combine CEX with the decentralized applications from DEX platforms. These Dapps allow for peer to peer referrals which save on cost for most businesses or corporations. This also creates exposure, which can increase business.
Examples of Hybrid Exchanges
Qurex was the first-ever hybrid exchange platform, created in 2018. It is a cutting edge platform that caters to trading by combining conventional stock exchange with cryptocurrency trading, which is decentralized. It is high performing and heavily secure, making it a perfect example of hybrid exchanges.
This exchange takes advantage of smart contracts technology to guarantee efficiency and security while trading. One can trade with Ethereum and TRON on the platform without registration, and its records are available on etherscan.
This hybrid exchange is for digital assets and boasts of security and uniqueness. It is also under the purview of British and Dutch regulations on cryptocurrency to ensure the legality of its transactions.
Hybrid exchange is the future of cryptocurrency and trading. It minimizes the disadvantages of CEX – like third party involvement, and DEX – like lack of regulation. It creates a high performing platform that combines the advantages of centralized and decentralized exchanges. These include regulations, security, and anonymity, speedy transactions, and transparency. In doing so, the hybrid exchange is quickly becoming the much-preferred platform by combining conventional means with new ideas in cryptocurrency.