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The Differences Between Decentralized and Centralized Exchanges
Hey Hamsters! Today, we have another special Academy session where we will be educating you about the differences between a decentralized exchange (DEX) and a centralized exchange (CEX). After all, they both exist for the same purpose—helping buyers and sellers trade—but by design, each looks a little different. To understand the difference, let’s nibble into the definitions.
Okay, let’s go! CEXs rely on centralized order books and custodial wallets. This means users must deposit their assets into the exchange’s control as an intermediary. They are also regulated by the governments in the countries they operate in. In contrast, DEXs, like Abby, leverage blockchain technology and smart contracts for non-custodial trading. This model gives users full control of their assets at all times. Yes, there’s no need to trust a central authority. And, of course, there are benefits like market manipulation prevention and resistance to hacking.
Understanding Centralized Exchanges (CEXs)
CEXs rely on centralized order books and custodial wallets. This means users must deposit their assets into the exchange’s control as an intermediary. They are also regulated by the governments in the countries they operate in. This centralized model is familiar to most traditional traders and offers the advantage of customer support and a user-friendly interface.
Advantages of CEXs
Centralized exchanges offer several advantages including:
Understanding Decentralized Exchanges (DEXs)
In contrast, DEXs, like Abby, leverage blockchain technology and smart contracts for non-custodial trading. This model gives users full control of their assets at all times. Yes, there’s no need to trust a central authority. And, of course, there are benefits like market manipulation prevention and resistance to hacking.
Advantages of DEXs
Decentralized exchanges offer several advantages including:
Challenges of Using DEXs
The main deal-breaker in this case is that DEXs are, in general—keyword here is “in general”—more difficult to use than their centralized counterparts. Fortunately, there are exceptions. One example is Abby, which is a non-custodial, limit order book decentralized platform for trading perpetual futures. Hence the name Perpetual DEX. Trades are settled on the Abby chain, an Ethereum level-2 blockchain powered by Arbitrum Orbit, which allows for communication between the Abby chain and other layer-zero supported networks.
Abby: Lowering the Barrier to Entry
Okay, but backtracking a bit, aren’t DEXs harder to use? Well, typically, the answer is yes. However, Abby is said to offer a lower barrier of entry for first-time DEX users. As a DEX that offers perpetual futures, it often uses an automated market maker mechanism (AMM). These are a bit more complicated. However, Abby offers a familiar limit order book model, similar to what is seen on CEXs. This means you can transition from CEXs to DEXs with familiar trading mechanics and precise control over trades.
Additional Benefits with Abby
Hamster Combat is a partner with Abby, which means a few extra benefits come along with it, namely airdrops. Users can redeem their airdrop claims onto Abby directly. Once redeemed, users can either hold on to their Hamster Combat position or take profit by converting a portion of their holdings into USDT. This USDT can be withdrawn to any EVM-compatible wallet, such as MetaMask, and doesn’t require Know Your Customer (KYC) verification, so your ID can stay in your physical wallet for now. But while your physical wallet is closed, your digital wallet is open and ready for rewards.
Points Farming Program
This is because Abby offers points farming to give back to users. Abby has launched a points program designed to reward active traders and community participants. Users can earn points through trading, referring friends, and completing simple tasks. Then, as these points are accumulated for future airdrops, users get the added benefit of long-term participation on the platform.
That’s all for today! Thanks for watching. Subscribe and remember, Hamsters: Power one for all and do for one. Bye!
