Should You List Your Token On a CEX or DEX?

Should You List Your Token On a CEX or DEX?

October 18, 2023
Optimizing Your Crypto Project: Choosing Between DEX and CEX with HollaEx Solutions

It’s time to go to market. After days, months or even years of assiduous development, your project is ready to take the plunge. Now is the chance to see how the Web3 community values your token. It’s exciting, perhaps nerve wracking, and ultimately will decide the long term fate of your project. You have to do it right.

The first fork in the road is whether to launch your token on a decentralized exchange (DEX), or a centralized exchange (CEX). Both have advantages and disadvantages, and making the right choice can be crucial for the future health of your product.

How a DEX Offers the Fastest Route to Market

The quickest and easiest way to list your token is to list on a DEX. The crypto ethos is all about permissionless, open access - with no custodians or gatekeepers, and DEX is just that. Anyone, and anything, can list on a DEX - with no barriers to entry. To list on a DEX, a project can create a new liquidity pool for their token, fill it with their own token and a currency pair (usually Ethereum), and let the joys of automated market making discover a price for your token. 

This is expensive, of course, as to ensure your token has trustable liquidity, expect to have to provide six-figure sums in the form of a trading pair to instill confidence in users. That said, most projects first list on a DEX as there is no barrier to entry. However, despite this clean route to market, doing so is fraught with difficulties.

Why Listing on a DEX Can Hurt Your Project

Firstly, and most obviously, as anyone can list on a DEX - there is zero quality control, and the marketplace is flooded with random tokens. Without a pre-existing marketing campaign, community and user base, there is little-to-no chance that your token will be noticed among the crowd. Potential users have thousands of tokens to choose from, and the list changes daily. 

There are also far less potential buyers in the market. The majority of trading volume in the crypto world is done on CEXs, due to their easy interfaces and features, and their fiat onramps. This means overall liquidity on a typical DEX is far lower than on a CEX, and that liquidity is spread far more thinly around the available liquidity pools. Therefore, tokens listed on a DEX are far more volatile, with no deep orderbook to stabilize the current price.

The type of buyers are different too. Many of them aren’t even human. The truth is that bots run rampant on DEXs. Sniperbots, sandwichbots, frontrunners, and many more. These bots make average retail users suffer when executing trades and often mean they get a hold of your token at a higher price than they initially expected to pay, which can sour the community about your project through no fault of your own. Also contributing to this is slippage fees, swap fees, blockchain gas fees, plus any other fees a DEX chooses to levy on its traders. Getting hold of a token on a DEX at a simple price can be thus a far more complicated endeavor than it should be and, again, risks raising barriers to entry for new purchasers of your token. 

The Joys and Pains of CEX

Listing on a CEX, then, is often seen as a holy grail for projects. Access to a captive audience who can use web2 interfaces to buy and sell your token, and enjoying the vast liquidity present on the biggest platforms, usually results in positive price action for a token. This, combined with a CEXs own marketing efforts on behalf of your project, and their ability to provide a stable, deep orderbook, means that many focus on getting listed on a centralized exchange to boost uptake of their project.

Yet, as we’ve talked about in a previous blog, listing on a CEX has its own pain points. Listing fees, legal fees, market maker fees, promotional fees, as well as the necessity to have a jurisdiction compliant project, makes listing on a CEX a difficult, expensive endeavor - even if your application is lucky enough to be plucked from the slushpile and advanced into the actual negotiations for listing to then occur.

Self-Listing on Your Own CEX

HollaEx provides a concrete solution to this problem. With HollaEx, you can launch your own CEX using our complete toolkit, and then self-list your token there. This way, you can create a route to market that is replete with a beautiful retail-facing interface, advanced features, and take advantage of HollaEx’s inbuilt liquidity, all without having to go to another centralized provider. Instead, you become a provider for your customers, and create a captive audience in a way that builds trust and lets them access your token at the fair market price.

Additionally, it's worth noting that HollaEx offers a complementary solution known as the Crypto OTC Broker system. You can read more about it here. This system is designed to function somewhat like a DEX swap but with all the advantages of an easy-to-customize centralized system. We've noticed that some clients face challenges when creating orderbook markets for their tokens. In such cases, the HollaEx Crypto OTC Broker serves as an alternative solution and a stepping stone before venturing into orderbook markets. It simplifies the process and ensures a smoother experience for both businesses and startups looking to establish their own crypto exchanges.

So, if you’re stuck deciding between listing on a CEX or a DEX, why not take advantage of HollaEx's comprehensive solutions, including the Crypto OTC Broker, to streamline your journey into the world of cryptocurrency exchange business?

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