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What are decentralized crypto exchanges? Decode the types of crypto exchanges



Decentralized exchange makes hacking risk almost impossible

Cryptocurrency exchanges are platforms that initiate the trading of digital coins. This can be better understood with an example from the stock market. Just as stock exchanges display the use of stocks, cryptocurrency exchanges handle the trading of virtual assets. Cryptocurrency exchanges are still a relatively new concept, and people are yet to completely get the hang of it. However, since so many investors are taking interest in cryptocurrencies, it is important to decode the types of crypto exchanges as well. Decentralized crypto exchange is one such platform.

So, what are decentralized crypto exchanges (DEXs)?

As the name suggests, these exchanges operate in a decentralized manner, without the intervention of any third parties. Decentralized cryptocurrency exchanges allow users to use peer-to-peer (P2P) transactions. This process relies on automated smart contracts. However, not all decentralized exchanges have the same infrastructure. Some popular examples of DEXs include Uniswap (V2), Tokenlon, 0x Protocol and Venus.

Why should you opt for DEX?

1) Privacy

If you want complete privacy then DEX should be your preferred option as they are anonymous. Centralized crypto exchanges may ask you for Know Your Customer (KYC) details, but DEXs operate on anonymity basis.

2) It is comparatively cheap

Centralized exchanges bear the additional cost of setting up and maintaining the infrastructure to offer secure services. Whereas, decentralized crypto exchanges work on the principles of automation and self-regulation which make them comparatively cheaper. The DEX will help you deduct all the extra costs.

3) Less hacking risk involved

Decentralized exchanges make the risk of hacking virtually impossible. If you are an investor who is most concerned with hacking issues, then this is the best option for you. You do not need to exchange assets to a third party, which reduces the chances of hacking.

4) Control your money

You have complete control over your wallet and funds. In order to transact, it does not ask you to transfer funds to the Wallet or any trading account. After all, having an e-wallet, just like a centralized exchange platform, adds to the risk.

Having said all this, the decentralized exchange comes with its set of disadvantages including that it does not start trading fiat currencies. Unlike centralized exchanges, decentralized crypto exchanges do not offer friendly features. DEX can be fraught with complications.

So, choose wisely.


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