With the surge in the number of cryptocurrencies in the last decade, the need for crypto exchanges to easily trade your tokens has also gone up. As with traditional finance, exchanges were bound to make it into the crypto sphere eventually, and centralized exchanges (CEXs) were among the very first. However, it wasn't long before the challenges in CEXs arose, and decentralized exchanges (DEXs) grew as a way to overcome them. In this post, we’ll explore the differences between CEXs and DEXs, and highlight how Umee is the perfect coupling to maximize your DeFi experience.
A centralized exchange is a platform that facilitates the buying and selling of cryptocurrencies by acting as a middleman between buyers and sellers. A CEX requires users to create an account and provide personal information, such as their name, address, and ID, to comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. Users must deposit funds into the exchange's custodial wallets before they can begin trading, and the exchange charges fees for each transaction.
A decentralized exchange is a platform that enables peer-to-peer trading of cryptocurrencies without the need for a middleman, in this case, a centralized third party. DEXs run on a blockchain network and rely on smart contracts to execute trades. Users maintain control of their funds by connecting their wallets directly to the DEX. They don't need to deposit funds into a central custodial wallet or provide personal information to comply with KYC/AML regulations. DEXs also typically charge lower fees than CEXs.
First and foremost, Umee operates on the cosmos ecosystem, which is a rapidly growing decentralized system of sovereign blockchain apps that can all freely interact with each other. As a layer 1 blockchain lending protocol, Umee itself offers cross-chain interoperability, which allows users to lend and borrow cryptocurrencies across different blockchains. As the platform continues to grow, we’ve become the most robust lending protocol in the cosmos ecosystem with over 20 listed assets. Umee is very much on its way to becoming the ideal platform for lending and borrowing any and all cosmos assets you find on a normal DEX like Osmosis, Liquid staking protocols like Stride and Persistence, and hush-hush, Umee’s upcoming LiquiDEX! Additionally, the platform provides robust security features to protect users' funds from hackers and other security threats. These precautions help prevent such centralized collapses like Sam’s FTX collapse or the decentralized $115M USD Mango Markets exploit.
At its core, Umee is a blockchain with the building blocks in place to work hand-in-hand with any and all exchanges and DeFi protocols, to provide a seamless user experience, rigorous collateral efficiency parameters for the health of the protocol and your safety, and the most robust selection of your favorite crypto tokens to lend and borrow with. Keep an eye out for our latest cross-chain listings like $DOT, $MATIC, and $AKT. And even more so, try to keep the exclusive Umee alpha of our upcoming LiquiDEX to yourself–if you can!
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