If you're already here on hive chances are you know what a Decentralized exchange (Dex) is and you've made use of them a couple of times, but I will go ahead and give a quick rundown for those who don't know or aren't quite conversant with the crypto terms.
To know what a decentralized exchange is you first need to know what an exchange Is. An exchange is a place where buying and selling occur. Now as crypto users, we make use of crypto exchanges for trading quickly between one or two cryptocurrencies that we own. The majority of the crypto exchanges such as Binance, coin base, and co are centralized exchanges as they are controlled by an entity. Having your crypto In a centralized exchange means you're not in full control over It, you just trust that the exchange will not run away with your crypto. There may be times deposits and withdrawals could be on hold, or one's account could get suspended for one reason or the other. You're also required to do KYC (Know your customer) in most of them. And the fees are dependent on the exchange. There's also a chance your funds could be lost If an exchange is hacked.
What Is a Decentralized Exchange?
Decentralized exchanges look to remedy the flaws of Centralized exchanges. Decentralized exchanges are smart contracts (code) usually open source, which help to perform to perform Crypto trades.
Why I think Dex's are better.
One of the things I like is Dex's that are open source. With centralized exchanges you have to trust people, while with decntralized exchanges, you just have to look through the code to see whether or not it is trust worthy. Really nice stuff if you ask me.
Also you are In complete charge of the crypto in your wallet. You have your keys so you can do what you want, when you want. You have no restrictions on when and when not to deposit and withdraw.
Transaction fees are very low compared to centralized exchanges. Fees as low as 0.1% and sometimes even feeless.
Then there's transaction speeds. Transactions are often faster thanks to the availability of liquidity pools. No need queueing and waiting for your order to be filled. There's also the added bonus of adding to liquidity pools and receiving more crypto.
One of the things people don't like is having to do KYC (know your customer) and share their private info with companies. With dex's there's no need to reveal your Identity or any other private info to anyone. Just have your keys and you're good to go.
The key thing about dex's is decentralization. Since it is decentralized It's a lot harder to hack as there's no central authority.
That being said, Dex's have a few drawbacks like low liquidity, Inability to trade other blockchains without having to use a bridge, Inability to convert to fiat, e.t.c. That being said, these are early days for Dex's so It's nice to see how great they are faring. In the when crypto Is being used by everyone everywhere it'll be nice to see how Dex's fare.
~THANKS FOR READING~
Posted Using LeoFinance Beta
A lot of people that don’t know the difference are very okay with their Binance accounts. Until they learn that using Binance means you don’t actually have unhindered access to your account. Binance holds your crypto, but allows you to access it with your password. Where as DEXs give you direct and sole ownership of your assets.
Spot on. All the profits and loss you make are just being reflected on their system. It's not in your custody. It's only when you withdraw that you actually own it. They can also do manipulation to liquidate those who do futures trading to steal your funds.
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There are benefits and cons on both CEX and DEX but what I love about CEX is the very low or fee-less trades. 😊
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Yeah, that's one of my favorite Dex features as well. Thanks for bring the cartel over.
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