I think the speed and low-fees required in (some types of) financial trading just can't happen fully on chain. So that's another reason for centralization in exchanges
Also it's interesting to note that in regular finance, exchanges and brokerage firms are separate entities .. meanwhile eg FTX was both the exchange and the 'broker'
Edit: just searched twitter and came across someone asking SBF this exact question about the conflict of interest in being both the exchange and broker (of course he was also trading with client funds on top of that..)
> I think the speed and low-fees required in (some types of) financial trading just can't happen fully on chain. So that's another reason for centralization in exchanges
That's currently being resolved with the implementation & adoption of rollups: There're currently multiple efforts towards developing zk-based rollups, with everyone (Polygon, zkSync, Scroll) taking a different approach towards providing it. Right now, optimistic rollups are the dominant rollup strategy right now, with improvements & decentralization already undergoing development & deployment.
Most still have guardrails in place, but it's publicly known & already being worked on.
> I think the speed and low-fees required in (some types of) financial trading just can't happen fully on chain. So that's another reason for centralization in exchanges
You could have an exchange whose users have 2nd-layer channels open to it for all the currencies they trade.
Trading can then happen near-instantly with 0 fees.
While still centralized, it doesn't need to take custody of any user's funds.
Also it's interesting to note that in regular finance, exchanges and brokerage firms are separate entities .. meanwhile eg FTX was both the exchange and the 'broker'
Edit: just searched twitter and came across someone asking SBF this exact question about the conflict of interest in being both the exchange and broker (of course he was also trading with client funds on top of that..)
https://twitter.com/dwarkesh_sp/status/1593243104114458627