Are you worried that your cryptocurrencies will be stolen in a centralized exchange? You are not the only one. From Mt. Gox and Bitfinex, to Coincheck and Bitgrail; There are many examples of exchanges that were hacked, and millions of dollars in cryptocurrency were stolen. But now there are other ways to exchange digital currencies without having to deposit your trust and your assets on these platforms. The solution: decentralized exchanges.
Offering person-to-person exchanges and allowing users to retain control of their currencies, decentralized exchanges offer a key security advantage over conventional platforms. As a result, they are experiencing rapid growth at this time, with several platforms already in operation and many more in development.
Decentralized exchanges, sometimes known as DEXs, are booming right now and offer a viable alternative for any cryptocurrency buyer who does not want to entrust their funds to a third party. In the following table you can find the details of some leading DEXs and the features they offer:
What is a decentralized exchange?
A decentralized exchange is a platform that eliminates the intermediary and allows users to exchange cryptocurrencies directly with each other. This allows operators to retain control of their funds at all times, instead of having to entrust them to an exchange provider, with operations that are executed using smart contracts.
DEXs are housed in a network of distributed nodes, which not only reduces the risk of being hacked; It also solves the server downtime problem that restricts users’ ability to exchange. DEXs are designed to offer an open and transparent network that makes cryptocurrency exchange accessible to everyone.
There are several decentralized exchanges that are already active and that offer exchanges between people in a variety of cryptocurrencies. However, this number is expected to increase dramatically in 2018 with a series of new platforms whose launch is already scheduled.
What makes it different from a centralized exchange?
Centralized exchanges are also online platforms where cryptocurrencies can be bought or sold, but unlike DEXs they require the use of a third party to complete transactions. Both buyers and sellers rely on this intermediary, the centralized exchange, to store their assets. This requires that the buyer and seller trust the exchange to complete their transactions and store their funds securely.
Characterized because they are easy to use, centralized exchanges allow you to buy digital currencies with other cryptocurrencies or with fiat currency. They provide a simple and direct entry point to the market, and currently represent the vast majority of cryptocurrency operations worldwide.
What benefits do decentralized exchanges offer?
The main advantage of decentralized exchanges is that they allow transactions without the need to blindly trust them. Instead of giving your funds to an exchange and putting your faith in it to execute the transactions as promised, and to manage your funds responsibly; You keep control over all this.
In a centralized exchange, even once you’ve bought your cryptocurrencies, you don’t really own them; the coins are still property of the exchange until you withdraw them to your personal wallet. In a decentralized exchange, you control your funds at all times and you can exchange currencies and tokens directly with other users.
In fact, it could be argued that centralized exchanges go against one of the basic principles of cryptocurrency. One of the key features of blockchain technology is its ability to eliminate the need for centralized control; and it is also worth noting that most cryptocurrencies are advertised as decentralized assets. In such an environment, buying and selling cryptocurrencies in a centralized exchange seems somewhat contradictory.
There are many other advantages to the decentralized exchanges approach. The distributed nature of the network substantially reduces the risks of hacking and server downtime. They also offer minimum rates compared to centralized platforms. They also allow users to maintain their privacy and carry out transactions without revealing all their personal data.