Still, about 80% of the volume in crypto is made on centralized exchanges. CEXes use a model similar to traditional venues like the New York Stock Exchange or NASDAQ. They are intermediary platforms connecting buyers and sellers, combining the role of a custodian and a broker.
Source: The Block, data by Coingecko
As traditional market makers in the stock markets, cryptocurrency market makers connect their trading systems to centralized trading venues to automatically send bid and ask orders to the limit order books.
Based on a different concept, decentralized exchanges use a deterministic pricing algorithm called an automated market maker, which utilizes pools of tokens locked in smart contracts called liquidity pools. Digital assets are usually listed on multiple exchanges. When the price of a crypto asset in the liquidity pool of a given DEX deviates from the global market price, arbitrageurs will come in and push the price back to the market price.
Market makers on DEXes provide liquidity to the liquidity pools. The protocol shares a percentage of the fees for transactions performed in the pools with a liquidity provider.
Market makers in crypto often manage the liquidity of a token asset on CEXes and DEXes simultaneously. In such cases, they maintain price parity across different venues.