September 19, 2021

CEX.IO company blog | Differences between traditional and crypto-exchanges: part 1

Crypto exchanges have a lot in common with traditional exchanges. Trading in stocks, commodity contracts, cryptocurrencies or any other financial instrument requires basically the same technical solutions and faces very similar problems. However, there are some differences.

Dmitry Volkov, CTO of the international cryptocurrency exchange CEX.IO, talks in detail about the differences between traditional and cryptocurrency exchanges.

Hardware and software maintenance

Traditional exchanges allow you to trade for 6-8 hoursa day, 5 days a week. This schedule provides for a 16-hour window each day for any maintenance of the technical infrastructure, as well as full days off. Crypto exchanges, as a rule, work 24 hours a day, 7 days a week, and it is much more difficult to maintain such a system. For non-stop operation, a special arrangement of all technical components is required.

Sometimes crypto exchanges experience disruption due tolong, unceasing transactions, and traditional exchanges usually do not face such problems simply because they do not operate 24/7. Crypto exchanges perform most of the maintenance without outages and in a way that is invisible to the end user. However, some other complex work requires a short work stoppage that becomes visible to the end user.

Traffic and load on exchanges

Traditional exchanges usually provide accessonly professional players such as brokers and large firms. They also have a much wider audience than any crypto exchange - they are usually in demand from brokers, prime brokers, managed funds and other players, which reduces direct traffic to the exchange.

The average person is unable to interact directly with a traditional exchange and is forced to rely on their broker.

On the other hand, crypto exchanges are more accessible and provide direct access to almost any individual, even with a $ 100 account.

This leads to the fact that on the crypto exchangevery high traffic is concentrated. Ironically, in terms of traffic, crypto exchanges are more centralized than traditional ones. This is due to the fact that crypto exchanges provide direct access to exchanges for individuals and small traders. This high traffic leads to more frequent outages, especially during periods of hype.

Correlation between number of users and protection requirements

Traditional exchanges, like crypto exchanges,have very high safety requirements. However, crypto exchanges are much more likely to experience fraud and hacking, especially given that crypto exchanges are available to almost everyone. This leads to the exchange either being hacked or becoming more secure by implementing more self-defense measures. Sometimes attacks are denial-of-service (DoS) attacks that can cause disruption to operations. This hostile environment is forcing crypto exchanges to become much safer and more reliable than traditional exchanges.

Read more in the next post.