Decentralized Cryptocurrency Exchange Platforms.
What are the Benefits?
In 2009, Bitcoin, the world’s first cryptocurrency, was hailed by privacy advocates amongst innovators and early adopters as a much safer and fairer alternative to central authority-issued fiat currency.
Bitcoin was (and still is) a completely decentralized, peer to peer digital currency and payment system. This means that no bank, government or other intermediary can ever confiscate coins or restrict how tokens are transacted.
Sadly, cryptocurrency exchanges where most people buy and sell digital assets, aren’t decentralized. This means that restrictions can be imposed on transactions. What is more, centralization is becoming an increasing problem for a growing number of real digital currency investors.
Centralized Exchange VS Decentralized Exchange Platforms.
What’s the Difference?
Most people looking to buy digital currency for the first time will instinctively gravitate toward exchanges like Coinbase. Such exchanges, however, are centralized. This means that they store coins and process transactions in central server locations or at least they have a central command which means a central choke point, which means they can be compromised. Much more importantly, centralized exchanges are managed by people who can limit, freeze, and confiscate assets at will.
Of course, the (apparent) benefit of centralized exchanges, lies with the fact that they offer fast trading and a high level of security when it comes to buying, selling, and storing digital assets. In reality, however, nothing could be further from the truth.
Centralized Cryptocurrency Exchange Hacks & Suspended Trading Woes
In December 2017 and January 2018, centralized exchange Youbit, and centralized NiceHash, were hacked. This resulted in over $100 million in Bitcoin being stolen from exchange users. Meanwhile, the same months saw cryptocurrency exchange Coinbase, suspend thousands of user accounts during two separate peak trading periods. - As a result, people looking to sell Bitcoin as prices plummeted, were left unable to trade or even move digital currency away from Coinbase.
Of course, technical glitches can and do happen. December 22nd, however, was far from the first time that Coinbase suspends trading and/or limit user accounts as Bitcoin prices fell.
Decentralized Cryptocurrency Exchange Benefits
Given the risks associated with centralized cryptocurrency exchanges, it simply doesn’t make sense for investors to store assets on such platforms. However, there is a safer alternative.
Like Bitcoin, and other blockchain-based cryptocurrencies, decentralized cryptocurrency exchanges aren’t hosted on centralized servers. Instead, decentralized exchanges exist on distributed blockchain nodes which collectively secure the network, and which no bad actor can hack, administer, or influence. This means that no limits can ever be imposed on transactions and no individual accounts can ever be restricted or frozen.
How Decentralized Cryptocurrency Exchange Platforms Work
At present, notable decentralized cryptocurrency exchanges include the likes of Bitshares and Bisq. These are exchanges which require no central authority to operate. Instead, they operate ‘trustlessly.’ This means they are incapable of restricting how users buy, sell, or trade, and as an added bonus, guarantee end users near-total anonymity.
Fast Efficient & 100% Safe - Almost
Because of increased hacking, government regulation, and fraud, cryptocurrency users familiar with how blockchain technology works, are already migrating to decentralized exchanges. It should be noted, however, that decentralized exchanges can prove somewhat challenging for anyone relatively new to the world of cryptocurrency, and easy to use interfaces are about as easy to find as leprechauns and fairies!
Given the above, while decentralized exchanges are guaranteed to grow in number and improve their usability as digital currency goes mainstream, new users should exercise caution.
By all means, users should be serious about moving to a decentralized exchange and I encourage traders to play around with a few decentralized cryptocurrency exchanges to see what works for them individually. See for yourselves if any of these exchanges offer the right user experience and find the one that suits you best. When depositing funds, however, new users, at first may want to only deposit small amounts of digital currency. This, and thoroughly research how different platforms work, especially when it comes to things like trustless identity verification, and weather you are signing over your funds at the risk of losing them to front runners or bad actors.
Although today cryptocurrencies are still in their infancy and fear, uncertainty, and doubt dominate the media, decentralized exchanges have the potential to change that sentiment, and nudge the crypto industry back into exponential growth mode.
Its about time for a DEX that addresses all these issues and provides easy user experience isn't it?
What do you think about the present state of the market? and do you see decentralized exchanges as the solution?
Thank you for reading, I look forward to your comments.
The Vanguard are coming and everything is about to change….stay tuned!
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