Centralized vs Decentralized Exchanges: Making Informed Crypto Trading Decisions

Cryptocurrencies have revolutionized the way we think about money and finance. As the popularity of digital assets continues to grow, so does the need for reliable platforms to buy, sell, and trade these assets. Two prominent types of exchanges in the crypto world are centralized exchanges (CEX) and decentralized exchanges (DEX). Each has its own set of characteristics, advantages, and drawbacks.

CEX, as the name suggests, is a centralized platform where users can trade cryptocurrencies. “Centralized” here means that there’s a central party behind the platform. Usually, a private company, or a for-profit institution. As it is, they will always take various transaction fees, beyond what it’s asked for by distributed ledgers.

These exchanges act as intermediaries, holding custody of users' funds. So, they usually don’t offer private keys to their customers. Instead, the users only have an account on a website, while all the funds are mixed in cold (offline) and hot (online) crypto wallets exclusively controlled by the company.

Popular examples of CEX include Bittrex, Binance, and Kraken. Centralized exchanges provide a user-friendly interface, high liquidity, and a wide range of trading pairs. They often offer advanced trading features like margin trading and futures contracts. However, using a CEX means relying on a trusted third party to handle your funds, which introduces a level of counterparty risk and the potential for hacking or theft.

Going decentralized

On the other hand, DEX is a decentralized exchange that operates more automatically, with smart contracts. They usually make use of an Automated Market Maker (AMM) model, which works using liquidity pools. This way, some users provide liquidity (crypto funds) to this platform in exchange for rewards, while others can easily trade with those funds anytime.

A liquidity pool is created by two or more tokens. This pool is governed by an algorithm that maintains a specific equilibrium within the pool. When a buyer initiates a trade, the algorithm calculates an appropriate price based on the token ratio and executes the transaction on behalf of the buyer. Likewise, when a seller enters the market, the algorithm adjusts the price to restore equilibrium to the pool.

Although this approach may initially appear intricate, it represents a revolutionary method of facilitating trades within any on-chain market. The AMM model eliminates the requirement for intermediaries, enabling traders to retain complete custody over their own funds.

They only need to send and receive the amount to trade in and out of the pool, always keeping their own wallets and private keys. By eliminating the need for a central authority, a DEX reduces the risk of hacking and offers users more privacy. Besides, the AMM model also can offer huge rewards for the participants.

Oswap.io and OSWAP Token

In the world of decentralized finance (DeFi), Oswap.io has emerged as a popular DEX built on the Obyte ledger. Oswap.io leverages this infrastructure to provide users with a decentralized and secure trading experience. It offers a range of features including **token swaps, liquidity mining, and its own governance token (OSWAP). \

Participating in Liquidity Mining is quite easy. The tokens to deposit must be compatible with the Obyte network. They can be e.g. GBYTE, bonded stablecoins, or tokens imported via Counterstake from other chains (such as ETH, USDC, or WBTC). It’s also possible to create new token pools.

The Annual Percentage Yield (APY —percentage earned from fees) for each pool is available at first sight. Currently, the APYs on Oswap.io vary from 0% to 138%, depending on the pool. In addition, every 7 days, 100 GBYTEs (around $1,300) are distributed among the LPs who locked their LP tokens on the platform. The 100 GBYTE reward is divided among LPs in proportion to their locked value.

The new OSWAP Token also provides its own rewards. You can buy and sell OSWAP tokens on its official website, using GBYTEs or any other cryptocurrency supported by the Counterstake Bridge. Oswap.io liquidity providers can stake their LP tokens here and get a share of OSWAP emissions.

By locking any amount of OSWAP tokens between 14 days and 4 years, anyone will be entitled to receive emissions of new OSWAP tokens (15% per year) and vote for changes in the platform. That includes adding new pools, deciding which Oswap pools should be incentivized with OSWAP token emissions, and choosing the proportions.

Oswap.io DEX offers a user-friendly interface and seamless integration with various wallets, making it accessible to both experienced traders and newcomers. It’s time to become decentralized!