Decentralized cryptocurrency exchanges
After many, even the top cryptocurrency exchanges were attacked by hackers, more and more traders began to pay attention to decentralized trading platforms. How do they differ from regular cryptocurrency exchanges, and what are their advantages and disadvantages?
What's wrong with traditional crypto exchanges?
Using in their activities cryptocurrencyThe user, in fact, is a bank for himself - the storage and use of assets is carried out directly by its owner. Trading on cryptocurrency exchanges contradicts this principle.
When you make a deposit on a cryptocurrency exchange, you give it the right to store your coins and make the exchange responsible for them. The client cannot manage his private keys - they are stored on the server of the exchange itself. That is, the very idea of decentralized currencies inherent in digital assets is destroyed by the use of centralized exchange trading.
Needless to say, your data and your money can fall prey to hackers. Even the most famous crypto-exchanges are exposed to attacks, and no one can guarantee with 100% probability that your investment will not be stolen from the exchange.
Decentralized cryptocurrency exchanges were launched to solve this problem.
What is a decentralized cryptocurrency exchange?
Decentralized cryptocurrency exchanges or DEX (decentralized exchange) are trading platforms that use blockchain, which eliminates the involvement of intermediaries. As a consequence, there are no intermediary fees to pay, and there is a higher level of security.
Each decentralized crypto exchange has a number of characteristics:
- any client of the exchange can control his funds;
- no critical point of failure: a central server or database that could be subject to a hacker attack;
- no possibility of extraneous settings;
- any government does not have the ability to close the exchange or restrict its operation;
- it is not under the control of any company or group of companies;
- Trading on DEX does not require verification, most personal data remains confidential.
Advantages of decentralized cryptocurrency exchanges
Compared with conventional exchanges, decentralized platforms have the following advantages:
- they fully comply with one of the basic principles of cryptocurrencies;
- contribute to the development of digital assets and stimulate the development of cryptography;
- are not subject to control by the authorities or any companies;
- provide their clients with full control over their funds;
- do not require users to provide their personal information;
- by distributing trading assets among its users, there is no downtime;
- provide so-called seamless liquidity for cryptocurrencies. This also applies to tokens that are not traded on centralized exchanges.
Disadvantages of decentralized crypto-exchanges
In addition to the advantages of DEX exchanges have the following characteristic disadvantages:
- The functionality of decentralized exchanges is not as comfortable as on traditional cryptocurrency exchanges. Many traders sacrifice privacy and other advantages of DEX for convenience;
- the volume of traded assets is often small, which creates difficulties with liquidity;
- Decentralized crypto exchanges do not allow trading with leverageThe use of trading advisors, as well as some orders (stop-loss, etc.);
- Many decentralized exchanges, at the moment, are at the beta-testing stage. Because of this for their clients there is a risk of losing money due to errors and bugs.
Conclusion
Despite their shortcomings and lack of distribution, decentralized cryptocurrency exchanges are essentially the only option for the further development of cryptocurrencies. The bans and restrictions imposed by governments of different countries contribute to this in no small measure.
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