I'm becoming increasingly perplexed as to the sheer volume of people who don't understand how exchanges work. I keep seeing articles boasting of how impressive it is that such-and-such exchange made money this year. This shouldn't be a surprise to anyone. Being surprised that an exchange made money when the traders lost is the same as being surprised a casino made money when the gamblers lost. The centralized facilitator is going to make a profit no matter what happens. This is why we need decentralized exchanges.
Personally, I think that centralized crypto exchanges charge fees that are more than fair:
| Exchange | Maker Fee | Taker Fee | Cashout Fee (flat) |
|---|---|---|---|
| Coinbase | 0% | 0.25% | $0 |
| Binance | 0.075% | 0.075% | variable ($0-$5) |
| CobinHood | 0% | 0% | variable ($3-$5) |
| Most Others | 0.1% | 0.1% | variable ($1-$5) |
When I was playing Texas Hold'em for money, players always had to "race the rake". They might take $5 out of a $100 pot. Okay, so only 5% right? Wrong. Half of that money was probably yours to begin with, so the profit gets raked 10%. Also, there was a good chance you were going to lose that pot in the first place. When everything is said and done in the long run, good players can barely make more money than the cardroom takes from them; if that.
Crypto trading is much more forgiving. It doesn't require any skill, and if you buy and hold the exchange barely makes anything off of you. However, fees are so low that this simply encourages people to trade all the time. This is how exchanges make all that money: traders get overemotional about their funds and keep buying and selling way more often than they should.
That being said, I think decentralized exchanges are the future, for more reason than one. First off, decentralized exchanges only charge you a fee based on how much it costs to put your order into a smart contract. No centralized entity makes a profit from the trade. However, this can still be a problem. I've spent $10 on a single trade at https://oasis.direct/ because the Ethereum blockchain was under attack and the gas fees were out of control.
The silver lining to this problem is that all dex fees are flat fees, so if you're trading with a large enough volume all fees basically round to zero. Also, once we get a dex on EOS and other cheaper smart contract platforms, these fees will all but disappear.
The main reason that dexes are the future is security. No one here is a stranger to the constant malevolent hacks against exchange after exchange. When a massive amount of crypto is all being stored in the same place, you might as well just paint a big juicy target that any hacker would be happy to take a shot at. With a decentralized exchange, all funds remain in the wallets of individual users, making it far more secure.
Steem Exchange
I've been tinkering with the idea of creating my own dex right here at Steem. Sounds crazy amirite? How could a single noob programmer possibly create an entire dex by themselves? Steem doesn't even have smart contracts yet!
Well, that's exactly what would make a Steem DEX so simple. Instead of relying on complicated trustless smart contracts this DEX would simply operate on the honor system, just like proof-of-brain does. Doesn't that sound like an absolute nightmare? Yes, yes it does!
Hear me out though. Say you wanted to buy $100 worth of Byteball right here at Steem (I do). A bunch of us got that free airdrop and you want to buy some more. With a Steem DEX you could post that you want to buy Byteball at whatever Byteball to SBD ratio and then split the transactions into $5 blocks if you were worried about getting scammed. If the trusted party (the one who receives money first) steals an increment of $5 the deal is broken, and they would get provably banned from the network. Most people will play nice because losing all their reputation to steal $5 isn't exactly worth it.
Games
I want to make games on the blockchain. I want players to be able to create digital goods that have value. Therefore, an exchange like this would be the foundation of that value. A digital asset is worthless if you can't transfer ownership.
An honor based Steem DEX with no smart contracts is exactly what this community needs. With an honor system, steemians can start building a reputation far more valuable than that sad little number next to their name. Also, as already stated, the amount of work needed to bring such an idea to life is relatively trivial compared to a full fledged exchange enforced by smart contracts. This means it would be incredibly easy to add trading pairs to said exchange.