Hey guys can you explain what is the difference between a centralized market and a decentralized market? Cuz i sort of get it but i need just some information about both of them. Explain what both of them means. Define it. Examples is preferred.* cuz i dont completely understand it.
In the Centralized markets there is a place (physical or electronic) to carry out the transactions, while in the case of Decentralized markets, it is associated with the existence of multiple prices, due to the fact that there are several contracting places (Spanish stock market before entry of continuous market where the prices formed for the same value were different in each one of the bags).
Decentralized markets are an emerging technology that offer the possibility to trade online in a completely different way from the traditional centralized model. Instead of the existence of a company, in which, through its website, it offers a meeting point for buyers and sellers, decentralized markets directly connect buyers and sellers to each other. This technology is possible thanks to the execution of peer-to-peer or P2P programs and the use of cryptocurrencies such as bitcoin to execute payments.
The main difference between these two types of markets is that in case of centralized market there is an entity regulating all operations held on such market. For example, the exchange itself as a special entity coordinates the trading process and imposes measures aimed on protection of customers. In other words, such centralized regulating entity does its best to create comfortable trading environment for all market participants. In the course of such actions it could also take actions to prevent fraud and market manipulation. Each centralized market has its own listing requirements to ensure that all instruments are safe and all information provided is reliable. Actually, regulatied market is a quite safe place for retail investor. The examples of such marketplaces are the well-known exchanges: NYSE, NASDAQ, SIX, LSE, MOEX and other.
At the same time, decentralized markets could sometimes provide interesting trading opportunities too, but they are always associated with higher risk due to their unregulated nature. Forex market is an OTC decentralized market. Moreover, in all cases the broker acts as a counterpart to each deal made by the trader, and this is the main difference between brokers operating withing Forex market and brokers providing access to the regulated centralized markets.