Eight Important Facts About Decentralized Exchanges
Crypto is based on decentralization. However, of nearly 200 major exchanges, there are almost no decentralized exchanges. However, this might change in the future if people embrace decentralized exchanges.
On a decentralized exchange, the user is always in control. The exchange never has any control over the funds. While the number of these exchanges is increasing, most trade volumes are still in central exchanges. Here are eight facts about decentralized exchanges.
1. They Might Help End Market Manipulation
Most people do not like how central exchanges can influence the market. In fact, they can suppress a token by deciding not to list it on their exchange. This is not the case for a decentralized exchange. Anyone can buy or sell any type of tokens with no hidden fees or bans.
Vitalik Buterin, the founder of Ethereum is in support of this idea. He hopes that central exchanges will end one day. As a result, the values of transparency and security that attracted people to the blockchain can be enjoyed in full.
2. The Deal With The Issue Of Custody
While they vary, most central exchanges function like escrow account for crypto. However, this is not an issue with decentralized exchanges. The exchange will never hold your crypto. Instead, they make it possible for two people to trade with each other using smart contracts.
3. Hackers Find Them Unpalatable
Various central exchanges have been hacked and hundreds of millions of dollars stolen. This is because they are such huge targets. This is not the case for decentralized exchanges; there is no single storage for crypto that hackers could target. Instead, they would have to hope that a user gives up their private key to them.
4. They Offer Unprecedented Openness And Privacy
Decentralized exchanges offer better privacy for each transaction. The P2P nature of each transaction allows trades to go past KYC and AML procedures. This is unlike central exchanges where users need to give up personal data and hope the exchange take measures to protect it.
5. They Will Impact Society
By making it possible to send crypto across the world, this exchanges will change society in a huge way. Many experts believe the technology will break down the international barriers just as the internet broke down international barriers.
6. They Are Not Efficient For Moving Fiat Into Crypto
A major flaw with these exchanges is that users cannot transfer fiat from banks into the exchange. To do this, stablecoins is an effective workaround. However, it is not likely that these exchanges will ever link to traditional bank accounts.
7. Most Of Them Are Hybrids
While they let you keep your private key, they still have an aspect of centralization since the order books are centralized. This helps with trading.
8. The Quality Of Their Host Blockchain Is Important
These exchanges are essentially DApps. If the blockchain on which they run has issues, these DApps will also face issues. The challenges of moving crypto from one account to the other that are powered on different blockchains still exist.