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How Does the Concept of an Insurance Fund Differ between a Centralized and a Decentralized Futures Exchange?

CEX fund is centrally managed and opaque; DEX fund is governed by smart contract/DAO, transparent, and protocol-based.
Greeks.Live23.11.25

How Does the Concept of an Insurance Fund Differ between a Centralized and a Decentralized Futures Exchange?

In a Centralized Exchange (CEX), the insurance fund is managed by the exchange itself and acts as a proprietary reserve. In a Decentralized Exchange (DEX), the fund is often governed by a smart contract or DAO and is capitalized by protocol fees or specific tokens.

The DEX fund's mechanics are transparent on-chain, while the CEX fund's internal operations are opaque. Both serve the same function of covering deficits.

What Is the Main Difference between a Centralized Exchange (CEX) and a Decentralized Exchange (DEX)?
How Do Options Contracts on a CEX Compare to Perpetual Swaps on a DEX in Terms of Counterparty Risk?
How Does a DAO Differ from a Traditional ‘Limited Liability Company’ (LLC)?
How Does a Decentralized Exchange (DEX) Differ from a Centralized Exchange (CEX) in Terms of Liquidity Provision?

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