As a centralized exchange was bailed out this week due to liquidity crisis, it’s time we revisit the merits of decentralized exchanges.
‘Not your keys, not your coins’ is a known yet rarely followed concept in the crypto world. Simply put, it means that if you do not have control over your private keys, you do not actually ‘own’ your crypto.
The noises grow louder whenever a centralized exchange (CEX) goes bust or files for bankruptcy protection. What happens to the investors’ funds when the withdrawals are halted and the exchange fails? Traders hope to recoup at least a portion of their holdings in the near future but are likely to be disappointed in the end.
The cryptoverse has been buzzing with the same sentiment this week as a centralized cryptocurrency exchange faced a ‘significant liquidity crunch,’ and a rival player agreed to bail it out to cover the liquidity crisis.
Following the market’s panic, the investors’ consensus is that it’s better to opt for a decentralized crypto exchange (DEX) than risk money on a CEX.
Resolving the dilemma with DEXs
Considering the conversations around illiquidity and security concerns around CEXs, we thought it crucial to emphasize how our business and exchange operations would be different from other crypto exchanges.
One of the key differentiators between a DEX and a CEX is that decentralized cryptocurrency exchanges are non-custodial. DEXs like GammaX do not hold custody of the user’s funds and are always in complete control of their assets. We provide audited and non-custodial on-chain settlement on StarkWare L2, so the trader’s funds are always safe. Additionally, traders on a DEX don’t have to worry about an exchange limiting or pausing their withdrawals due to issues like market crashes, illiquidity, or technical errors.
At a high level, what we are building is a decentralized, order book-based derivatives exchange. GammaX chose this model because we believe the DEX approach brings more benefits to our traders. It provides our customers with low latency and ease of access, non-custody, and trustless execution.
Additionally, GammaX is pursuing multiple partnerships to ensure adequate liquidity. Our investors include Dexterity Capital and Ledger Prime, suppliers of liquidity to many top exchanges.
At GammaX, we are committed to our trader-centric vision and are working to build a decentralized exchange with the widest and most liquid selection of perpetual trading pairs.