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Decentralized Exchange

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Meaning of Decentralized Exchange

A Decentralized Exchange (DEX) is an exchange market which does not rely on third party services to hold one’s funds or assets. Here, trades are peer-to-peer (P2P), they occur directly between users, and the whole process is automated. So far there are two ways to go about this. One way is to create proxy tokens (an asset that represents either fiat or crypto currency). Another way is to use a decentralized multi-signature escrow system.

This creates a “trustless” system, where one does not have to entrust their funds to a third party (such as a centralized exchange). With a decentralized exchange, trader/investor is able to stay in control of their money, and therefore be safe from hacking attacks.

Another advantage is that there is no disclosure of personal details, one can make trades anonymously using decentralized exchanges. These models are fairly new, and have yet to adapt the functionalities of centralized exchanges which have been around for a long time. Users might find centralized exchanges not so easy to use, and will not have access to features such as margin trading and stop loss. See Exchange and Centralized Exchange!

DEX Interfaces eliminates the potential for account theft or hacking attempts. After all, there is no centralized engine or server to be hacked, and no coins are stored on behalf of users either. Hackers looking to take advantage of DEX users will have to go after those users individually, which is much easier said than done.

DEX will remove the need for exchange delisting coins which mostly do kill the future of such coins and crash the price has traders rush to selloff before been delisted on centralized exchanges.

Examples: WavesDEX, IDEX, EtherDelta, ForkDelta, Bardatex

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