Will the decentralized trade prevail in the market?

Exchanges play a huge role in the cryptocurrency sector. Without them, people would not be able to trade and invest in crypts. We have a fantastic range of platforms like CEX, Coinbase or Kraken. While centralized services like these are currently the most popular and reliable, a new competitor is starting to emerge on the market. Let's take a look at the characteristics of decentralized exchanges and examine the possibilities of becoming market leaders.

A decentralized exchange (DEX) allows users to negotiate directly with each other, without the need for an intermediary. On a traditional website, a central server manages your information, bank details and transactions, while a DEX gives users the ability to remove this control. This corresponds to intentions of cryptocurrencies and blockchain: each participant who has an influence on the network is the key to success. Currently, decentralized exchanges deal exclusively with crypto-crypto trading, but there is no reason why they can not include FIATs in the future.

So why are they decentralized? cryptocurrency exchanges helpful? As we have already said, these platforms are more in line with the original view of cryptocurrencies that had no governance and control. For now, let's explore the four main advantages offered by DEX.

A pure decentralized exchange uses only blockchain information: no personal data (names, e-mail addresses and bank account details) are required. You only need a public address to use an exchange, while on the traditional platform, you need to share your account information with the operator. This is fantastic for those who wish to privately negotiate and keep their transactions unknown. But if DEXs become prominent, regulations could be enforced.

Centralized exchanges maintain control of your finances during transactions. In addition, the funds stored on the website, unless it is a cold store, are technically not owned by the users themselves. With decentralized services that do not store any resources and simply connect people with the corresponding orders, you have full responsibility and control every process.

A centralized exchange is easier to attack because of a single server or database. When the platform is decentralized, there is no single point of error or entry. It is much more difficult for a hacker to target DEXs because most processes participate in users' computers. However, it has a price – Usability is often sacrificed for safety. Currently, this type of cryptographic service is extremely complex, as it has to maintain more information and provide more steps / clicks to conduct transactions.

DEXs have no downtime. When an update is required, it is simply distributed to each node in the network (a buyer's and seller's computer). As with security, there is no single point of failure, so a decentralized website is unlikely to shut down completely. If a node inside the network drops, others can simply resume the game and continue to work.

Although decentralized exchanges have many advantages, they are all but perfect. The following are some of their main drawbacks.

The actual process of using a DEX is not simple. When using a centralized exchange, simply register an account, deposit funds and start trading. To use a DEX, you need to connect to a Däpp or install a specific client. In addition, it is usually necessary to set up a secure wallet and sometimes a DEX node.

Centralized exchanges currently represent about 99% of the commercial market. Their alternatives have a small participation and therefore have a much smaller liquidity. When using a DEX, you may suffer from a lack of available operations.

When using a decentralized platform, you are relying on the speed of your node, network and recipient node. This can cause latency and slow down transactions. The operation via a central server makes these processes faster.

It is really difficult to say whether DEX will become prevalent in the future. Currently, their technology is still under development. These platforms certainly need to improve their accessibility and transaction speed – this will give people more reasons to use them. Furthermore, DEXs must build its user base or find an alternative method to maintain greater liquidity.

At this time, centralized exchanges simply have more customers and a wider offer. But we believe that decentralized services have a bright future. Already existing ones like EtherDelta, AirSwap, Bancor and Altcoin are already growing. There are many obstacles to overcome before they are ready for the masses, but current trends are positive and aim for long-term improvements and vitality.