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With the introduction of the exchange of cryptocurrency and blockchain technology 10 years ago, we have also introduced a concept of functioning decentralization. Of course, such an idea has been around for a while, but we've never been able to get as close as we did once the blockchain technology emerged.
As a result, it allowed us to eliminate the intermediary, and encrypted they did the same when it comes to making payments and direct transactions. However, when it comes to encrypting trading, exchanges become a necessity, and they are the only aspect that is still highly centralized. As a result, decentralized exchanges emerged as a way to correct this and solve the problem.
Centralized exchanges are not acceptable for the future of cryptography for several reasons. Hacking, rate manipulation, token list charges, and the like are too trivial for most of the encrypted users to feel comfortable.
Initially, centralized exchanges were tolerated. They were still considered a new concept and many believed that a certain level of centralization could still serve as good for the cryptic world. An increase in the rapidly following hacking attacks showed that this was not the best idea and that it was time for exchanges to become decentralized. Here's how the DEX came.
How are decentralized exchanges better?
According to experts, decentralized exchanges are much more practical when it comes to negotiating larger volumes. They are much safer and, until now, hackers have never been a problem for any DEX. Considering that there are no centralized servers that can be hacked, all information is secure.
Subsequently, many centralized exchanges are charged for the charging of high commissions, especially when it comes to the token list. This is not simply a problem for DEX because they do not have a centralized authority that should pay for the servers and in the same way. In this way, resources can be listed without spending large amounts of money on the process itself, and the projects listed are more likely to grow and develop further.
Finally, there is a question of greater fungibility. In short, fungibility is described as the ability to track cryptos. Some cryptos, like Bitcoin, can easily be traced and see who was a previous owner of the coins you now own. This is particularly important due to the fact that BTC has been used for notoriously and openly illegal activities. Legitimate and law-abiding users do not want to be connected to these activities, which is why you always know where your currency comes from and what kind of story it has.
Disadvantages of DEX
One of the biggest drawbacks of DEX is that they are not exactly user-friendly like centralized cryptocurrency exchanges. The criptos are still new and largely unknown, despite all the attention they have received in the last two years. In centralized exchanges, even new users can easily navigate and access trading, while DEXs are simply too complex for most beginners. It is easy to get confused and lose with all the activity, which can deter people from entering cryptographic space in general.
Another big problem is their transaction speed. Speeds are not great on DEX, which can be frustrating and expensive since all validations must be done on the blockchain. Centralized exchanges have a central authority that takes care of this, which is why transactions can take place quickly and without problems.
The third big problem is that some DEXs can be a little expensive. Some use gas, which means that block confirmations can be expensive. Considering that cost reduction is one of the biggest reasons why people decide to enter the cryptic world, in the first place, this could be a puzzle for many newcomers.
Finally, there are several DEXs that worked to improve speed and reduce costs by using smart contracts for transaction validation. However, to do this work, they had to introduce some centralized features. This is a source of confusion for many investors, as for true decentralization, but also want an economic service, fast and quality.
Considering that DEX are still new, the problems that currently worry them will be solved in the future. However, for now, they are still there, which is why decentralized exchanges have as many problems as advantages and advantages. However, as this technology grows and develops, DEXs will likely become dominant, while centralized exchanges will have difficulty keeping up. The same will be true for banks and experts believe that more and more users will seek true decentralization in every aspect of the financial sector.
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Disclaimer: this article should not be taken as, and is not intended to provide, investment advice. Global Coin Report and / or its affiliates, employees, writers and subcontractors are cryptocurrency investors and from time to time may or may not have holdings in some of the coins or tokens they cover. Please conduct your own in-depth research before investing in any cryptocurrency and read our full disclaimer.
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