How Does the Settlement Process for a Derivatives Trade Differ between a CEX and a DEX? ⎊ Path

How Does the Settlement Process for a Derivatives Trade Differ between a CEX and a DEX?

In a Centralized Exchange (CEX), the settlement process is internal, off-chain, and handled by the exchange's clearing house or risk management system. Funds and collateral are moved on the exchange's internal ledger.

In a Decentralized Exchange (DEX), settlement is executed on-chain via smart contracts. The smart contract automatically transfers collateral and profit/loss between parties upon expiration or exercise, using the blockchain's transparent and immutable ledger.

The DEX process is trustless but vulnerable to MEV.

What Is the Main Difference between a Centralized Exchange (CEX) and a Decentralized Exchange (DEX)?

How Is MEV Extraction Managed in Proof-of-Stake (PoS) Consensus Mechanisms?

Can a Hybrid DEX Model Eliminate MEV Completely?

How Do MEV-boost Auctions Attempt to Democratize Access to MEV?

Why Is a CEX Order Book Susceptible to Insider Trading Rather than External Front-Running?

What Is a ‘MEV-Share’ Protocol and How Does It Redistribute MEV?

What Is the Primary Difference between a Centralized Exchange (CEX) and a Decentralized Exchange (DEX)?

Name a Major Difference between a Centralized Exchange (CEX) and a Decentralized Exchange (DEX) for Options Trading