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You must have heard a lot about Blockchain Trilemma. What about Exchange Trilemma?

Exchange Trilemma refers to the fact that an exchange cannot simultaneously provide a scalable (fast and smooth trading regardless of volume), decentralized exchange. and capital efficiency (liquidity). Example of an exchange failing to overcome the limits of Exchange Trilemma: The most dominant exchange in the DeFi space, Uniswap, is highly decentralized and relatively scalable at the protocol level. . However, relying on users sending liquidity in the form of LPs allows for seamless trade execution. For this reason, becoming an LP without active management is not a very profitable opportunity due to the IL (Impermanent Loss) risk. In this way, Uniswap chooses to prioritize Decentralization and Scalability through its AMM model, but does not achieve the same capital efficiency as CEXs. Centralized cryptocurrency exchanges, like Binance and Coinbase, use an order book model like Sei Network, but do not decentralize the execution of transactions. Using an order book allows more efficient use of capital with a market maker model than with an LP mechanism. Similarly, with the use of a centralized server, the sequential execution of transactions through the order book is highly scalable. Essentially, however, these CEXs are not decentralized – this sacrifice is made for capital efficiency and scalability CONCLUSION: 1⃣ CEX is good to scale, good liquidity but not decentralized. 2⃣DEX is decentralized, scalability is relatively open (the future will be better thanks to Layer2 + sidechain) but liquidity is still very poor. 3⃣ Thanks to LayerZero and Magpie, liquidity problems will be significantly improved. However, because of the risk of Impermanent Loss when adding Liquid Pool, many people are still afraid, so they do not add liquidity. To achieve high liquidity like Binance, Coinbase, this problem needs to be solved. And Sei was born to solve that. Learn more about #SEI’s #CLOB at: #Sei #Nitro #SVM #Solana

Source: Collector



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