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DeFi Or New Ways of Blockchain Implementation: What Will Lead The Next Bull Run?

On the 16th of February, a panel discussion of the participants of the European Blockchain Convention 2023 took place on the topic “Why market-making is key for a crypto market recovery.”

The panelists discussed the crucial role of market-making in the crypto market’s recovery, highlighting the challenges and opportunities that come with this practice.

WhiteBIT is one of the largest centralized cryptocurrency exchanges in Europe, with 3.5 million customers worldwide, has shared its insights and opinion with us on the following questions:

What is the difference between a CEX and a DEX?

CEX, or centralized exchange, is a traditional exchange operated by a centralized authority. It acts as a middleman between buyers and sellers, holding users’ funds in its custody.

DEX, or decentralized exchange, is a newer exchange built on a decentralized blockchain network. Unlike CEXs, DEXs do not rely on a central authority and instead use smart contracts to execute trades directly between users. This means that users remain in control of their own funds at all times. DEXs often have lower trading fees and are less susceptible to hacking attacks, but they may have lower liquidity and a less user-friendly interface than CEXs.

With the rise of decentralized exchanges, what do you see as the value proposition of centralized exchanges in the crypto ecosystem?

Despite the growing popularity of DEXs, CEXs still play an essential role in the cryptocurrency ecosystem and offer several unique value propositions.

While DEXs are decentralized and do not have a central point of failure, they are not immune to security risks such as front-running attacks, smart contract vulnerabilities, or malicious actors. On the other hand, centralized exchanges typically have more sophisticated security measures in place, such as multifactor authentication and cold storage.

Besides, centralized exchanges have a more user-friendly interface and offer more advanced trading tools than DEXs, making them more accessible to novice traders.

Moreover, CEXs are subject to regulatory oversight. They must comply with KYC/AML requirements, making them a more attractive option for institutional investors and traders who require high compliance.

Do exchanges need licenses to operate in every country they offer their services?

Exchanges must comply with the licensing requirements in the countries where they operate to avoid legal and regulatory issues. Failure to do so could result in fines, legal action, and reputational damage.

Is KYC a must or a plus for exchanges? Should DEXs include KYC?

Whether KYC is a must or a plus for exchanges depends on several factors. For example, the regulations in the exchange’s jurisdiction, risk tolerance, and customers’ preferences. First of all, the KYC implementation regulates the requirements and protects the exchange from unscrupulous users.

As for DEXs, there is no clear consensus on whether they should include KYC. Some proponents of KYC argue that it can help to prevent illicit activities on DEXs and promote the adoption of DEXs by more traditional financial institutions. Others, however, believe that KYC goes against the fundamental principles of decentralization and user privacy that DEXs were designed to uphold.

Is there any insurance to protect retail investors operating on an exchange, as we may find in TradFi?

There is not a widely recognized or regulated insurance scheme for digital assets that could offer retail investors the same level of protection as in traditional markets. While some exchanges may offer their insurance policies or other forms of protection, these are generally subject to a different level of oversight or regulation than traditional finance.

As a result, retail investors should be aware of the risks involved and take steps to protect themselves. It can be performing their own due diligence on the exchanges they use, using strong security measures to protect their assets, and diversifying their holdings across multiple exchanges and assets.

Do you have any advice for retail investors?

We don’t provide trade advice, but there are some basic hints for retail investors:

1. DYOR

Before investing in any asset, it’s essential to do your own research and understand the risks involved. Don’t rely solely on the advice of others, and be sure to verify any information you receive.

2. Diversify your portfolio

Don’t put all your eggs in one basket. Diversify your portfolio across different assets and asset classes to spread your risk and increase your chances of success.

3. Invest what you can afford to lose

Investments always come with risk, so it’s essential only to invest money you can afford to lose without causing significant financial hardship.

4. Use strong security measures

Keep your assets secure using strong passwords, two-factor authentication, and other security measures. Don’t share your private keys or additional sensitive information with anyone.

5. Be patient and disciplined

Investing is long-term, so don’t expect to get rich overnight. Stick to your investment plan, be patient, and don’t let short-term market volatility or hype influence your decisions.

6. Keep learning and stay informed

The cryptocurrency and blockchain industry constantly evolves, so staying informed about the latest developments and trends is essential. Keep learning and improving your knowledge to make informed investment decisions.

Investing can be risky. However, it can also be rewarding for those who approach it with caution and discipline.

It was first cryptos, then NFTs, and followed by Metaverse. What is the booster of the next bull run?

The market is volatile and unpredictable. Hence, it is difficult to forecast which assets or technologies will become the focus of attention. However, some potential areas of interest for investors and traders include decentralized finance (DeFi) applications, blockchain-based gaming, and other innovative use cases for blockchain technology. Ultimately, the next booster of the next bull run will depend on various factors, including market sentiment, technological developments, and macroeconomic conditions.


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Watch the panel “Why market-making is key for a crypto market recovery” to learn more about crypto market-making.