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Decentralized Crypto Exchange: The Future Of Centralized Crypto Exchange

It’s not that they were bad. They were there first.

(August 07, 2020) — The launching of Bitcoin as the first digital currency and its subsequent popularity meant the need for the existence of an exchange where people can buy or sell it on demand. During those foundational days, the acquisition of a Bitcoin is only possible through CPU mining and trading through forums like Bitcoinmarket.com. Upon the closure of the website came the main crypto exchange giants Kraken, Bitfinex, Bitstamp. Itbit, and Mt. Gox, and others. Fragile as they may be, these pioneers all served an ever-expanding but unpredictable cryptocurrency base, growing resilient in the process, that, except for Mt. Gox, are operating still until now.

The above-mentioned exchanges are examples of a centralized crypto exchange. It means that a third-party entity brokers all client transactions, hence the word, trust. With the blockchain ledger out of the equation, you entrust control that your exchange of choice monitors and secures your trades, that in case you lost your encrypted keys, you can still gain access to all your coins. The more you disclose client and corporate information details, the more flexible your asset transfers can become. To many, compromised privacy is a big no-no since private accounts can become vulnerable to hacks. Even then, centralized exchanges can be a newfound trading haven for most as they offer fiat pairings, that of exchanging your cryptocurrency to any fiat currency of other countries. And because of the centralized character of these exchanges, prices are relatively stable, and the throughput and scalability are high. It is only when centralized exchanges sputter that your assets can be compromised. Mt. Gox was holding 70% of the world’s bitcoins in 2014 before security was breached and the hacker carting away 850,000 bitcoins.

A decentralized crypto exchange is a platform of buying and selling crypto assets without relying on intermediaries. Transactions are based on smart contracts and atomic swaps. The blockchain is where funds are kept while transactions are peer-to-peer and are automated. Tradings are processed through either proxy tokens or assets, or make use of a multi-signature escrow system. A decentralized currency-centric exchange escrows its native currency specific to the blockchain. A currency-neutral exchange, on the other hand, is not limited to the currency native to the specific blockchain ecosystem. the appeal of decentralized crypto exchanges rests in the absence of regulations and a central controlling authority, no submission of client details, and no deposit-withdrawal requirement. Meaning, you are anonymous in your transactions with little or no fees collected from you. You are automatedly directed to a transaction.

Centralized crypto exchanges remain to be more popular compared to the decentralized ones because of the element of trust. Many investors are still quite new to digital trading and have been used to arbitraries that intermediaries legally accountable seem to be a requirement for them. More sophisticated traders, though, are opting for decentralization using their knowledge and expertise in navigating the digital zone in an independent, controlling manner. Only one thing, you become more responsible for your own success, or failure. This empowerment is really attractive. It means trusting only yourself.

With all being said, centralized structures are beginning to adapt to decentralized protocols. though in a cautious manner. Some of their operations are shifting to more client empowering features that DeFi is characterizing such as transparency, security, and a high level of solution-oriented performance. Trust is already shifting away from error-prone human intervention to a fully robotic tamper-resistant system that is the revolutionary blockchain technology.

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Your fiat and digital asset custodian. Bridging the gap between Banking and Blockchain.

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