Governance models for crypto exchanges vary between “centralized” and “decentralized” exchanges, but also between individual CEX and DEX.
Crypto exchanges 101
If you are at all involved in the cryptocurrency market, you need to be aware of crypto exchanges – which are major platforms for trading digital assets.
However, not all crypto exchanges are created equal, especially when it comes to a centralized exchange (CEX) like Binance versus a decentralized exchange (DEX) like PancakeSwap. A key difference between a CEX and a DEX is their governance model.
A CEX is controlled by an authority like a company, while a DEX has a decentralized power structure. In addition, there are Hybrid Exchanges (HEXes) like Bitfloor and Poloniex that share the characteristics of CEXes and DEXes.
Let’s explore:
CEXs are set up similarly to traditional exchange markets in that they are controlled by a centralized power structure. Your administrators make the core decisions related to their operations. Typically, these platforms rely on order books to manage asset exchanges. They are also the most dominant types of exchanges in the crypto market. Some of the most popular are Binance, Coinbase, FTX, Huobi, and KuCoin.
DEXs, on the other hand, are designed to allow their users to influence key governance processes. Some exchanges use a voting system where users holding a certain amount of native tokens are allowed to participate. DEXes appeal to a central tenet of the crypto spirit, the decentralization of power, and their governance tends to be more democratic and dynamic than that of CEXs.
Of course, different CEXs have different governance models, as do DEXes.
Let’s look at some of the biggest crypto exchanges:
CEX: Binance
Binance is the world’s largest crypto exchange by volume, with more than $15 billion in 24-hour trading volume. A team of executives runs this centralized crypto exchange. The leadership team is led by Binance co-founder and CEO Changpeng Zhao (CZ).
Management is charged with providing all managerial responsibilities necessary for the running of the business, including the development and implementation of policies. These top-down decisions are then communicated to users of the exchange via events, statements, press releases, etc.
CEX: Upbit
Upbit is a South Korean crypto exchange founded in 2017. The exchange is also a CEX but is regulated differently than Binance as Upbit is a subsidiary of South Korean fintech firm Dunamu.
Dunamu has four subsidiaries including Upbit, two investment exchange platforms and a stock management platform. The exchange is available in Korea, Indonesia, Thailand and Singapore.
The exchange has multiple CEOs, with each CEO running their startup in a single country that is located. They will then all report to the management of the exchange’s parent company, Dunamu. Only CEO Alex Kim takes care of subsidiaries in Singapore and Indonesia. These leaders split their roles as follows:
DEX: Pancake Swap
PancakeSwap is the dominant DEX on BNB Chain. This crypto exchange is community-based and allows any native token holder CAKE to participate in the governance process.
The governance process is pretty simple: A CAKE holder makes a proposal. If the proposal receives significant support from the community, it becomes a core proposal. The core proposal is then voted on by other CAKE owners and implemented if accepted.
DEX: Uniswap
Uniswap is a leading DEX for Ethereum, Polygon and other chains. This platform also features a decentralized governance system driven by its native UNI token. It also has a simple and decentralized governance system. Here are the ground rules the platform released when UNI went live in September 2020.
- A user must have at least 1% of the total UNI (Delegated) supply in order to submit a governance proposal
- As voting uses tokens, 4% of UNI’s total supply must be used to support a community proposal for it to be successful.
- There is a mandatory 7-day voting period
- There is a 2-day time-out on the execution of the proposal.
Click this link for more information on how to vote on Uniswap.
What is PancakeSwap:
PancakeSwap is a decentralized exchange (DEX) built on top of the BNB chain. It offers users various features like Liquidity Pools, Swaps, Yield Farming, Syrup Pools, Automated Market Maker, Initial Farm Offering (IFO), NFT Profile System and many others.
Additionally, the protocol helps users get the most out of their crypto assets by trading, earning through yield farming, and winning via lottery, prediction, and NFT collectibles. With the highest trading volume in the market, PancakeSwap is the leading DEX on the BNB chain.
Where to find PancakeSwap:
Website | Twitter | Medium | GitHub
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