A recent study shows that the crypto market has about 500 platforms offering various products and services related to digital asset trading. At the same time, about 60% of them store data outside of DLT systems.
The World Federation of Exchanges (WFE) has released the first part of its large-scale study of the interaction of exchanges with the crypto market, the main purpose of which is to improve the understanding of benefits and risks of the crypto market infrastructure and its functioning.
According to the WFE research findings, there are over 500 cryptocurrency trading platforms operating around the world, many of which also facilitate the trading of various digital assets and provide related products and services. However, the technological innovations they utilize have raised concerns among researchers about their quality and stability.
The report indicates that only 40% of crypto trading platforms are decentralized and can truly ensure their users’ anonymity. Thus, about 200 cryptocurrency platforms use AMM (Automated Market Making) protocols based on distributed ledger technology (DLT) to set prices. In contrast, the majority of crypto platforms use the Central Limit Order Book (CLOB), which forms the basis of all CEXs. Users of nearly 300 cryptocurrency platforms may not even be aware that they’re using centralized services.
The CLOB essence is to use DLT systems only for data storage, while price oracles, quote calculation, and order execution take place outside the blockchain network. On the one hand, this approach reduces transaction costs, but on the other, it leads to complete dependence on regulated services.
The WFE analysts, however, pointed out that centralized platforms potentially have less negative impact on traditional financial systems, as they’re more transparent to regulators. Moreover, CEXs are more popular among users.
On-chain analytics shows that the level of activity of CEX users has decreased over the past year almost twice, and the popularity of DEXs is actively growing amid regulatory pressure on centralized platforms.