Crypto Trading Landscape: 40% Decentralized, 60% Centralized – Latest Report Breakdown
According to a WFE analysis, 40% of crypto trading platforms are decentralized and employ distributed ledger technology, while the majority (60%) use central limit order books (CLOBs), which are similar to regulated exchange platforms.
According to the WFE survey, there are 500 crypto trading platforms that offer a variety of crypto-related products and services. Several crypto platforms took part in the poll, providing important insights into retail and institutional demand.
Many crypto platforms, according to the research, rely on off-chain CLOB systems for price oracles, quotation presentation, and order execution. These entities exclusively use blockchain for settlement and custody, which means traders do not engage with it directly, which reduces transaction costs. Transaction fees are thus only applicable when orders are settled on the blockchain. This type of cryptocurrency trading platform is known as a centralized exchange (CEX).
Except for custody services, retail demand for crypto-linked products and services is stronger than institutional demand, according to the WEF poll. Institutional behemoths have demonstrated a larger need for and increased demand for crypto custody services. The analysis indicates that retail customers are less aware of the need of investor protection based on the varied types of product requests by each sector of investors.
In terms of liquidity and client demand, the survey reveals that CEXs have higher trading activity than decentralized platforms that provide cheaper transaction fees. The research also gives insight on the price difference between identical trading pairs on different platforms, which might lead to arbitrage opportunities. It contends, however, that this type of price movement exposes a potential inefficiency issue in the cryptocurrency market.
According to the paper, despite the fact that most nations impose Know Your Customer rules, both centralized and decentralized crypto trading platforms have fallen short of implementing such procedures due to a lack of uniform crypto regulations.
Keywords: crypto, gas fees, trading