Friday, 18 January 2019

What are the advantages of a decentralised cryptocurrency exchange?

These are the main advantages of decentralized cryptocurrency exchanges compared with centralized exchanges:

1. Decentralized exchanges are more in line with what Satoshi Nakamoto (credited as the creator of Bitcoin) wanted to achieve. Part of Satoshi’s vision was namely to achieve a society where we can send and receive money without any third party (like a big bank) in between. Centralized exchanges are – like big banks – a third party in between. This – that it’s more in line with Satoshi Nakamoto’s and the anarcho-capitalist’s vision of a trustless peer-to-peer system has fuelled the growth of decentralized exchanges.

2. A decentralized exchanges (or a “DEX”, for short), do not store funds for its users. Rather, deals are made through smart contracts and atomic swaps so that currency never passes through the hands of an escrow service - it’s just peer-to-peer. The storage of funds could arguably also be viewed as an advantages for centralized exchanges however. It depends on what view you have here.

3. The servers of decentralized exchanges are normally spread out across the globe. This is different from centralized exchanges that normally have their servers more concentrated. This spread-out of servers leads to a lower risk of server downtime and also means that decentralized exchanges are virtually immune to attacks. This is because if you take out one of the servers, it makes little to no difference for the network of servers in its entirety. However, if you manage to get into a server at a centralized exchange, you can do a lot more harm.

4. Anonymity. Normally, centralized exchanges also require you to give a lot of information when on-boarding as a customer. This is usually to comply with anti-money laundering rules of the country in which the exchange is based. This is not always the case with decentralized exchanges where you can be more anonymous.

Decentralized exchanges are definitely gaining market shares against their centralized counterparts. You have probably heard of at least one of the following exchanges that are all decentralized exchanges: Mercatox, EtherDelta, Bibox, Bitshares Asset Exchange, Waves DEX, Bancor Network, OpenLedger DEX, CryptoBridge DEX, Stellar DEX, OasisDEX, IDEX, Token Store, Bisq, Nxt Asset Exchange, Counterparty DEX, Burst Asset Exchange, OmniDEX, CryptoDerivatives, Coinpit,, Fcoin Exchange, Barter DEX, Switcheo Network,, DDEX or Ethermium.

By Eric Read
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