Blurring the Lines Between Centralized and Decentralized Exchanges

Blurring the Lines Between Centralized and Decentralized Exchanges

(Part of Kappa Lab’s new series on Protocol Design Research)

We’re kickstarting a new series at Kappa Lab that explores protocol design research, deep dives into new architectures that are quietly reshaping how decentralized systems actually work.

Whenever we see an interesting design in the wild, we reach out to the team, ask questions, and unpack what’s happening beneath the surface.
The goal isn’t marketing, it’s to understand the mechanics and incentives driving the next generation of decentralized infrastructure.

The Fading CEX–DEX Divide

In the early days of DeFi, the contrast between centralized and decentralized exchanges was clear:
CEXs were fast but opaque; DEXs were transparent but slow.

Today, those distinctions are blurring.

Design decisions, centralized sequencing, closed-source matching, and hybrid validation layers are making it harder to draw a clean line. Some DEXs operate with semi-centralized components to achieve performance, while others push back toward full transparency and verifiability.

What’s emerging is a middle ground: architectures that combine CEX-level efficiency with verifiable decentralization.

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Case Study: BULK’s Sidecar Architecture

One project experimenting at this frontier is BULK, which is pioneering decentralized validation for high-frequency trading on Solana.

When we asked how their system works, the team explained:

You can imagine BULK as a sidecar network on a modified Solana validator client. Deposits, withdrawals and assets live on Solana, but then the orderbook is the network itself. What this allows for is gasless orders, sub-20 ms matching latency, and 2.5 million+ orders per second,  all while staying economically aligned to Solana. We’re not fighting for blockspace like others, which lets us reach the kind of performance essential for HFT.

Their approach keeps validation decentralized, and validators can opt in directly while using a dedicated execution layer to handle matching and throughput.

Recently, BULK raised $8M in seed funding, led by top crypto investors. While we don’t focus on capital raises, this is a signal that the broader ecosystem recognizes the importance of new architectural models for DEX execution and validator-aligned performance.

This momentum suggests growing confidence that decentralized trading infrastructure can meet — and even exceed — the expectations of professional traders.

Rethinking What’s “On-Chain”

BULK’s design forces a deeper question:
Is decentralization about where computation happens, or who gets to verify it?

By extending the validator model rather than replacing it, BULK treats decentralization as a function of verifiability, not locality.
Execution can move off-chain, as long as validation and settlement remain open, auditable, and economically aligned.

From Binary to Spectrum

As Kiran, Kappa Lab’s CBO, put it:

These architectural evolutions blur the lines even further. What we’re seeing now is the emergence of DEXs that borrow operational efficiency from CEXs without giving up the decentralization and composability benefits of an L1.

Instead of a binary between CEX and DEX, the future may look like a spectrum of architectures, unified by open validation and composability rather than ideology.

Closing Thought

As DeFi matures, the builders pushing for verifiable performance are shaping what comes next. Projects like BULK highlight how the conversation is shifting, from “fully on-chain” to “provably fair, validator-aligned, and fast.”

That’s where the next wave of exchange design will unfold: in the space between performance and principles.

Special thanks to BULK’s CEO Kobie McGlashan and CTO Junaid Peer for taking the time to share insights and answer our questions during the preparation of this piece.