I hear the argument a lot that besides better liquidity, the reason to use centralized exchanges right now is because of better trade speeds.
But that never made too much sense to me.
Out of people I’ve had that conversation with, a grand total of 0 of them were high frequency traders who need split-second speed on all of their trades. None of them were running bots that make dozens of trades every second. None of them had millions of dollars counting on them getting a trade in a few milliseconds before someone else.
So why do I hear this argument from regular crypto traders?
Sure, these traders have accounts on Binance, Bittrex, Coinbase Pro, KuCoin, and whatever other exchanges offer trading for their obscure alt coin or a fiat onramp. Sure they check prices every morning when waking up and every night before they go to sleep. But from what I’ve gathered the amount they benefit from those exchanges’ throughput is almost not at all.
The biggest bottleneck these traders face is deposit and withdraw times.
I contend that most of you out there don’t miss market opportunities because of split second differences in trade speed of the exchange, but rather because it takes a frustratingly long time to log in and move assets to an exchange to place a trade (assuming you’re part of the 46–74% of crypto users who keep their crypto in a personal wallet).
It’s like looking at this list of steps:
- Log in: 4 minutes
- Deposit: 15 minutes
- Place trade: 1 minute
- Match and fill trade: 0.01 seconds
- Withdraw: 15 minutes
and concluding that the speed at which an exchange matches and fills orders is what makes it the fastest exchange.
What if I told you there were exchanges out there that could cut whole minutes out of your trade time instead of just milliseconds?
How many more trades would you make if you didn’t have to go through the hassle of moving your assets onto and off of an exchange? How many more price movements would you have taken advantage of?
This is why decentralized exchanges blow centralized exchanges away.
That same trade process on a decentralized exchange would look like this:
- Connect wallet: 30 seconds (or instant if MetaMask already connected)
- Place Trade: 1 minute
- Match and fill trade: 15–60 seconds
- Close the webpage: 1 second
Now I’m not a Wall Street stock broker or anything, so maybe someone else can fill me in; which is faster, 35.00017 minutes or 2.517 minutes?
Liquidity will come, especially with dedicated market makers entering the crypto space. UI/UX will improve quickly now that the base decentralized trading technology has been built out. This is why I believe that very soon it won’t make sense for your average trader to trade on a centralized exchange over a decentralized one. And that’s without even addressing the security risks you face by leaving your crypto on a centralized exchange for even a minute.
Adopt DEXs. Improve your trading.
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