Deciding What Kind of Exchange Is Best for Your Token

After the collapse of FTX, users began to withdraw funds from centralized exchanges. This has led some crypto projects to be warry to list tokens on them. It seems to them that all CEXs may start to go bankrupt, which is why companies are looking toward listing on the DEX.

In the article, I explain why there is no reason to panic and why centralized exchanges are more suitable than DEXs for listing tokens.

Centralized Exchanges Have More Users

When users get into cryptocurrencies, they often register on centralized exchanges, such as Binance or Coinbase. CEXs have a variety of cryptocurrencies, good trading volume, and liquidity. Centralized exchanges are intuitive and convenient for most users, so they have a much larger audience. Whereas, decentralized exchanges are complex, require specific knowledge, and are used by a more professional audience.

Major crypto exchanges have disclosed some of their financial statements to reassure investors.

Binance, CoinBase, Kraken, KuCoin, and others have decided to show that they have been audited for reserves and confirmed their stability so that users do not withdraw billions of dollars from their wallets. Regulators urge not to trust these reports, but in general, they should convince investors that it is not worth panicking ahead of time.

If you list a token on the DEX, there is a risk of losing the attention of a large audience. Even though, sometimes, listing on a CEX can be a complex task. At this point, some projects decide to list on a decentralized exchange because it seems easier and cheaper. Listing on the DEX may work well for some projects but can be less effective for the majority of others.

Why Listing on the CEX Can Be More Profitable

The fact that centralized exchanges have more users gives better opportunities for the projects. But there are several other reasons to use them.

Centralized Exchanges Promote Projects

CEX makes a lot of efforts to advertise and promote new coins. It announces the listing on the website and social networks. They also offer additional marketing activities and contests, staking, and farming programs.

There Are More Costs on Decentralized Exchanges

At first glance, it may seem that listing on the DEX will be free, but it is not. First of all, you will need to create a liquidity pool. It depends primarily on the type of the project and can range from 50,000 to millions of dollars.  The liquidity pool should be about 300-700 thousand dollars to build trust with a user.

This is a lot of money, which not every startup can block in the pool in the current market. The company will have to invest this money from its assets, as users of decentralized exchanges are afraid to invest in the liquidity of a new project.

There Are a Lot of Bots on DEX Exchanges

Decentralized exchanges are flooded with bots like “sniperbot” and “sandwichbot”. The first one flushes liquidity from the pool at the moment of listing, and the second one tries to earn on every market maker's deal. Because of this, the project will have to look for third-party software solutions to keep bots from working or put up with costs.

Market-Making Costs

On centralized exchanges, the commission for transactions is much lower than on decentralized ones. And some CEXs even offer accounts with zero commissions for market making. The swap fee is higher on DEXs, and it is also worth taking into account the blockchains fee, which can differ dozens of times. Therefore, market-making will require significant investments.

The listing platform depends on the token being listed

It is impossible to give general advice on which project suits for listing on CEX or DEX. It depends on the project. There are niche crypto companies, such as projects in the field of GameFi, which are more convenient to choose a decentralized exchange.

Listing the project on exchanges should always be part of the development strategy. If you need help with your listing strategy, do not hesitate to contact me.