Generally, a distinction is made between centralised exchanges (CEX) and decentralised exchanges (DEX) such as Uniswap. This report outlines how the two types of exchanges differ from each other and how they work in the first place. Centralised crypto exchanges (CEXs) replicate traditional asset exchanges, maintaining a book of orders submitted by buyers and sellers. When orders are matched, the market price is determined and, in traditional markets, clearing and settlement houses ensure that transactions become effective. Generally, trades on crypto exchanges need to be prefunded which introduces complexity in managing fiat balances across exchanges, fragmenting market liquidity and reducing…
