Marc JANSEN and Lars KARBACH
University of Applied Sciences Ruhr West, Tannenstr. 5, 46236 Bottrop, Germany
Tel.: +49 208 88254 807
E-mail: marc.jansen@hs-ruhrwest.de
Received: 15 November 2023 /Accepted: 19 December 2023 /Published: 28 February 2024
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Abstract: This paper provides a comprehensive analysis of the architectural and conceptual distinctions between
centralized and decentralized exchanges. While both types of exchanges serve the same fundamental purpose,
they differ in their infrastructure, governance, and operational nuances. Centralized exchanges operate with a
central authority overseeing transactions, while decentralized exchanges facilitate peer-to-peer trades without
intermediaries. This research particularly delves into the implications of these differences when leveraging both
exchange types for arbitrage transactions. A novel architectural approach is proposed that seamlessly integrates
centralized and decentralized platforms in smart contract-based arbitrage schemes. Within this framework, we
introduce the concept of "flash"-like transactions, which expedite trades and potentially reduce transactional
frictions. The subsequent sections of the paper delve into the inherent advantages of this approach, particularly
emphasizing its superior risk management capabilities. To substantiate our claims and provide tangible evidence
of its efficacy, we conclude with a detailed evaluation of an example implementation of this proposed system.
Keywords: Blockchain, Arbitrage trading, Decentralized exchange, Centralized exchange.
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