Hybrid, non-custodial exchanges could help restore industry trust in crypto, but CEXs remain key for onboarding new users, according to according to X10 CEO Ruslan Fakhrutdinov.

Centralized cryptocurrency exchanges (CEXs) continue to play a crucial role in the crypto ecosystem, especially for attracting mainstream retail adopters, despite the significant impact of the FTX collapse, which led to a loss of at least $8.9 billion in user funds. These exchanges remain the primary entry point for new users buying their first cryptocurrency.

The Role of CEXs in Onboarding New Users

According to Ruslan Fakhrutdinov, founder and CEO of the cryptocurrency trading platform X10, centralized exchanges are poised to drive user adoption in the near future. Fakhrutdinov highlighted several reasons why CEXs are vital for onboarding the next 100 million retail adopters:

1. Trust and Intuitive Experience: New investors often prefer CEXs due to the perceived trust in the underlying companies and the user-friendly trading experience they offer.

2. Easier Transition: It's simpler to transition users from a centralized exchange to a hybrid exchange than to bring in completely new users directly to decentralized platforms.

Hybrid Exchanges: A Middle Ground

Hybrid exchanges, such as X10, combine the elements of both centralized and decentralized exchanges, offering a more balanced approach:

1. Centralized Order Book with Onchain Settlements: X10 uses a hybrid central limit order book that executes trade settlements onchain through StarkEx’s layer-2 engine, merging the efficiency of CEXs with the security features of DEXs.

2. Marketing Strategies: To attract traditional retail investors, hybrid exchanges need to adopt marketing strategies that resemble those of conventional financial services rather than focusing solely on crypto-native marketing.

The Current Dominance of CEXs

Despite the emergence of DEXs and hybrid exchanges, CEXs still dominate the crypto trading volume. For instance, the cumulative trading volume on DEXs was $3.56 billion in a 24-hour period, significantly lower than the $15.1 billion traded on Binance, the largest CEX by volume.

Rebuilding Trust Post-FTX Collapse

Fakhrutdinov suggests that the future generation of crypto exchanges should aim to be trustless but not necessarily permissionless. Hybrid exchanges can help restore trust in the industry by offering:

1. Trustless Features: While maintaining a degree of control and oversight, they can incorporate elements that reduce third-party vulnerabilities.

2. Non-Custodial Benefits: By combining the non-custodial aspects of DEXs with the user experience of CEXs, hybrid exchanges can offer a secure yet accessible trading environment.

Institutional Adoption and Market Growth

Recent moves by companies like Robinhood and Revolut into the crypto exchange space signal positive trends for institutional adoption:

1. Robinhood’s Acquisition of Bitstamp: This $200 million deal allows Robinhood to serve institutional clients in the United States, indicating growing institutional interest in crypto.

2. Revolut’s Crypto Exchange Launch: Revolut’s entry into the crypto exchange market further underscores the increasing institutional and retail flows into the crypto industry.

Conclusion

CEXs remain pivotal for the crypto industry's growth, particularly in attracting mainstream retail adopters. While DEXs and hybrid exchanges are gaining traction, CEXs' ability to provide a trusted, user-friendly experience ensures their continued relevance. Hybrid exchanges, by combining the best of both worlds, can help bridge the gap between centralized and decentralized platforms, rebuilding trust and driving further adoption in the post-FTX landscape.