The vast majority of cryptocurrency exchanges are centralized, which means their order books are centrally controlled. There is also a small number of exchanges which are decentralized, which are governed by Automatic Market Makers. There are some advantages and disadvantages to both of those models and Biokript will combine the best features of both while avoiding their drawbacks.
Centralized exchanges are less secure than their decentralized counterparts since they keep at least some part of their funds in hot wallets which are susceptible to hackers. CEXs also require KYC and store investors sensitive information which could also be exposed to bad actors.
On the other hand, decentralized exchanges such as Pancakeswap or Uniswap are governed by Automatic Market Makers which employ liquidity pools where liquidity providers deposit equal amount of each asset in a trading pair, allowing traders to execute their orders. However, this model also has a significant disadvantage in the form of price slippage which is caused by the lack of liquidity. Using DEXs traders have a risk of paying a much higher price for an asset, especially if they are executing large orders.
Decentralized exchanges also suffer from front-running problem. Since blockchain is transparent, all on-chain transactions are visible publicly before they are mined. A front-running bot can “front-run” a transaction by paying a higher gas price and execute it before the user’s transaction. In the end, the user ends up paying a higher price or having his transaction rejected.
Since DEXs don’t have any protocols to implement KYC or any anti-money-laundering protocols, they suffer from regulatory challenges. Because of that, DEXs are filled with scam projects because anyone can deploy a smart contract which could be a rug pull, honeypot, or a straight up scam. And because there is no central authority behind DEXs, there is no recourse for scammed investors.