Pros of Centralized exchange over Dex. Need help in gathering facts

[abhisheks77]

Hello,

We are gathering some facts and information for opening a centralized exchange. We already know benefits of Decentralized that there are more advantages. But from development point of view, it is difficult to develop programs and write codes for Dex, specially a good Dex. That is reason, I want to keep Decentralized in road map in later stage.
Now, we have a possible investor and his focus to know is, when whole world is behind Decentralized, why you guys are developing another centralized trading exchange ? Instead of keeping decentralize in roadmap and develop it at later stage, why don't you work on dex now itself ?
I am trying to gathering some pros of centralized, specially from market and investor point of view and would like to hear opinions.
More ideas will help me to write more concrete answer.

Appreciate your help.
Thanks

[1715430565]

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[1715430565]

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[1715430565]

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[FuzzyBear]

I am somewhat under the impression that to setup a Centralised exchange there is already pretty much open source software out there that does all you need with only having to do a degree of branding and setup for the new exchange to be setup.

I remember looking back and seeing 2-3 possible solutions like this 4-5 years ago now.  Thus for another centralised exchange to setup the level of development required is much lower and there are lots of developers that would be able to help out with various parts of the project.

Decentralised exchanges however have a much higher entry lvl of development and coding required to setup I have found.  This puts people off, also reduces the number of people able to help out and offer support when things go wrong.

So from a technical development point of view I would think that this would help explain why centralised exchanges are more popular at the moment than decentralised ones when it comes to setting up a new one for new businesses.

Not sure how much of a factor this would be also but usually takes a few years to work out and fix bugs and issues in common codebases, thus the code used to run decentralised exchanges has not really been fully stressed tested or checked for bugs etc thus there may be a fear of a vulnerability being found and thus causing serious issue for the new company while they try patch a fix or hope they have not been hit with an attack already etc.

Fuzzybear

[abhisheks77]

Thank you. It is nice explanation and agree that, from technical point of view, it is much more difficult to create a 'close to perfect' Decentralised exchange..

In my case, here problem is, investor being a not-very-technical-person, is looking at de-facto "Dex is better than Centralized". Definitely I can explain, how difficult it is to implement codes in better way. But every week or so, there has been new ICO announcing that they are coming with DEX. Many of them are not capable and just for the sake of attracting investors and create hype for their ICO sale, they anyway announce their idea. But investors are listening DEX more frequently.
Now, apart from explaining that we are not coming up DEX due to technical reasons, are there other benefits of Centralized, which can be explained ? Like, in centralized, trading fees would benefit him, as investor ? Or any more reasons to say, "We want to come with Centralized now, and DEX later" ?

[FuzzyBear]

Ah yes the no technical person wanting explanations for benefits and reasons why not gone for the very technical new development that everyone is excited and talking about.

I would almost approach this from the other end where the limits of a decentralised exchange.

In this case your decentralised exchange has no sole person responsible and thus accountable for the software tat is running their business.  When something goes wrong and people want to speak to a manger / person in charge etc.  Now by running a centralised exchange you get to promote YOUR exchange and your face name business profile etc and can have full transparancy and not be accused of hiding behind decentralised code or anonymous users / investors / developers etc

Secondly you in a centralised exchange have put your company name on the line and this can be very powerful in itself.  Remember the Winklevoss twins and how they bought a load of BTC well any time btc was on a rally or price goinjg up in the early days these 'big' names become important to offer credibility and a familiar name for people to read further into and investigate.  Your centralised exchange can offer to do this with your name again. Base example but I would be interested in seeing what else say Bill Gates has produced if I am going to use this Windows Microsoft computer... and I am not sure who has developed my decentralised computer or the code behind it thus I would be putting trust in someone else research or trust...

I'm sure there are some other legal advantages also... ie tax writeoffs, claiming tax back and limited company insurance that you would be eligible for if you ran your exchange as a standard business model etc but I bet the tax man or other legal bodies will be looking closer into your decentralised exchange when you start turning a tidy profit etc. and this more than likely a bit of a grey area for legal standings etc till time passes.

Fuzzybear
 

Thank you. It is nice explanation and agree that, from technical point of view, it is much more difficult to create a 'close to perfect' Decentralised exchange..

In my case, here problem is, investor being a not-very-technical-person, is looking at de-facto "Dex is better than Centralized". Definitely I can explain, how difficult it is to implement codes in better way. But every week or so, there has been new ICO announcing that they are coming with DEX. Many of them are not capable and just for the sake of attracting investors and create hype for their ICO sale, they anyway announce their idea. But investors are listening DEX more frequently.
Now, apart from explaining that we are not coming up DEX due to technical reasons, are there other benefits of Centralized, which can be explained ? Like, in centralized, trading fees would benefit him, as investor ? Or any more reasons to say, "We want to come with Centralized now, and DEX later" ?

[abhisheks77]

From earning prospective, can we also say that overall turnover of centralized exchange would be greater than DEX, as fees collected would be bigger, thus gives more monetary benefits to owner/creator or centralized exchange ?
I am not sure, how DEX earn their profit. How they collect their trading fees ? Etherdelta (DEX) was too complicated for me to use and understand, so never researched on that.

[KingScorpio]

Hello,

We are gathering some facts and information for opening a centralized exchange. We already know benefits of Decentralized that there are more advantages. But from development point of view, it is difficult to develop programs and write codes for Dex, specially a good Dex. That is reason, I want to keep Decentralized in road map in later stage.
Now, we have a possible investor and his focus to know is, when whole world is behind Decentralized, why you guys are developing another centralized trading exchange ? Instead of keeping decentralize in roadmap and develop it at later stage, why don't you work on dex now itself ?
I am trying to gathering some pros of centralized, specially from market and investor point of view and would like to hear opinions.
More ideas will help me to write more concrete answer.

Appreciate your help.
Thanks

ok some short help:

a centralized exchange with licence etc. is being created by a human trusted system, or an exclusive state central group, like wallstreet etc, their advantage is for example its secure from emp or cyber attacks, however its vulnerable to social issues at that location,

a dex can anyone create it can also be created almost indistructible and its inclusive, is not bound to lizence

its also not associated with a system that disadvantages some over others. like a democracy.

a dex is also much cheaper to opperate and much more efficient.

a centralized exchange has an owner that could use to fund a marketing and develop work a trader community in it, if arbitrage is not well developed.

etc.

[LeGaulois]

The trust is easier to get with a centralized exchange. Users can feel safer to use such platform like their bank website. Decentralized exchanges are still considered like "the darknet" (not a good comparison but you get the idea) People are not yet so attracted to use the decentralized ex.
From a marketing opinion, it is also a lot easier to market

[vv181]

I am trying to gathering some pros of centralized, specially from market and investor point of view and would like to hear opinions.

Easy UX.
Able to converting FIAT-cryptocurrencies and vice versa flawlessly.
The team behind the company is clear, so if the thing goes wrong, they able to sue them.

Actually, I'm not in favor of centralized exchange, saying that the recent Poloniex require an image verification. It makes me completely confident about staying away from it.

[abhisheks77]

All great idea, very helpful. Thank you.

If I am thinking from investors point of view, who is going to look, how he will earn. Can we also say that overall turnover of centralized exchange would be greater than DEX, as fees collected would be bigger, thus gives more monetary benefits to owner/creator or centralized exchange ?
Does it makes an difference ?

[carlfebz2]

All great idea, very helpful. Thank you.

If I am thinking from investors point of view, who is going to look, how he will earn. Can we also say that overall turnover of centralized exchange would be greater than DEX, as fees collected would be bigger, thus gives more monetary benefits to owner/creator or centralized exchange ?
Does it makes an difference ?

Basing on my own experience neither which way you do make use DEX or Centralized ones Fees would always exist and i do see the same profitability or deduction.There might be some gaps but only minimal i guess therefore we can conclude owners can get profits from it. The difference only here is the volume generated between the two which would matter on how much they would able to accumulate.