Decentralized exchange Probably most people are using exchanges like Binance, Huobi or Bittrex to trade coins without knowing that they are all centralized exchanges - exchanges are managed by a company / organization and any assets you deposit on a centralized exchange are held by this institution, not is a decentralized floor. So what is a decentralized floor? And how is it different from a centralized floor? This article Virtual money blog will learn with you.
What is a decentralized exchange?
Decentralized Exchange (DEX) are exchanges that do not depend on a third party to keep your money, all user transactions are conducted automatically and directly between users (peer network) . In other words, DEX - a decentralized exchange gives full control of funds and transactions to users, eliminating intermediaries to avoid risks of security issues, hackers, fraud. In addition, the taxation or control of funds of decentralized exchanges is very difficult.
What is the difference between decentralized and centralized floors?
1. Right to control the fund
User centralized trading floor Deposit funds to the floor to facilitate transactions. These funds are controlled by an intermediary trading service. This means that the order books, as well as the custody rights, are in the hands of centralized platform services.
In a decentralized cryptocurrency exchange platform, users transact directly with other traders without a central server. There is no centralized service that owns command books and custody rights. Therefore, money is controlled by users and participants in this platform.
A number of centralized exchanges each allow anonymous trading accounts on their platform. However, new government regulations that have emerged in recent months have led to compliance KYC and AML Strict. It is difficult to trade anonymously on a centralized cryptocurrency exchange. Opposite, Decentralized exchange is where anyone can remain anonymous.
Centralized exchange users depend on the platform to authenticate and authorize their transactions. In a way, the platform is a third-party intermediary that provides trusted crypto exchange services.
With Decentralized exchange, we do not need to depend on an intermediary. By the smart contract and some protocol implementations Blockchain, the entire system is built to provide unreliable authentication and authorization of cryptocurrency exchanges.
The value of decentralized exchanges
1. Transactions are processed faster and cheaper
Decentralized exchange Being able to facilitate transactions to be done faster, more cost effectively than centralized exchanges. The elimination of intermediary authenticators significantly reduces fees and time delays before the buy / sell order is processed.
2. More difficult to attack
Decentralized exchanges do not keep users' money and no organization interferes with the process, so it is difficult for the exchange to be hacked. Meanwhile, history has recorded many attacks on centralized platforms such as Bitfinex, Bittrex...
3. Seamless integration with secure hardware wallets
This is a great advantage of Decentralized exchange. Many decentralized exchanges offer seamless integration with popular hardware wallets like Ledger Nano S or Safe deposit to ensure a much safer transaction.
Users can send coins directly from hard wallet Their to the smart contracts of many decentralized exchanges. With centralized exchanges, there is no way for users to manually fill in the private key to transfer coins from hardware wallets to the exchange. Because if you do, the chances are high that they will be cheated or track the keyboard.
4. The fund is completely controlled by the user
One Decentralized exchange owned and controlled by all parties involved so no centralized corporation has the right to retain client funds. Money control is always in the hands of users thanks to the peer network structure. Transactions occur between parties in the network with smart contracts, which can only be controlled by the private keys of the parties involved. Users control private keys as well as their capital at all times with decentralized exchanges.
Some disadvantages of decentralized floor
1. Only support for few platforms
Currently the most popular platform for decentralized exchanges is Ethereum with some of the ERC-20 token get transaction support. In the future some other major platforms like NEO will also be supported by decentralized exchanges.
2. More difficult to use
This is why exchanges like Binance or Huobi popular, simply because they are easy to use. A lot of smart contracts need to be navigated for use in decentralized exchanges, which can be dizzy for users, even for those who are knowledgeable about cryptocurrency technology.
Centralized exchanges also have a simple user interface, which is visually organized and easier to get started than decentralized exchanges.
3. Lack of powerful features & functions
Most decentralized exchanges only support some basic trading functions. More in-depth trading features and tools like margin trading, stop loss orders, ... are often missing in decentralized exchanges. This is probably the main reason why decentralized exchanges are still not popular in the cryptocurrency market.
A number of decentralized exchanges are active
Currently, there are not too many decentralized exchanges operating, because the number of users of DEXs is not much, the trading volume is low. Some decentralized exchanges can be listed as: IDEX, Etherdelta, Bancor network, Kyber Network, 0x Protocol, CoinChangeX, DDEX, .. And some other uncommon ones I didn't name.
Above is the article "What is a decentralized exchange? What is the difference between centralized and decentralized exchanges?Hope to bring the most useful information to readers about this type of exchange. If you have any questions, please leave a comment below I will assist you. Do not forget Like, Share , and 5 star rating to support Virtual money blog Please. Good luck.