Decentralized exchanges are garnering popularity
The biggest fear for any crypto traders is probably waking up to a hacked account with nothing left in the wallet except your tears. Well, it’s 2019 and conventional crypto exchanges have been looking into ways to up their game and provide a seamless user experience — a decentralized exchange (DEX).
So, what is DEX and why should we care?
Even though blockchain prides itself on being entirely decentralized, most of the crypto exchanges on the market are centralized. Due to Know-Your-Customer (KYC) and anti-money laundering regulations, exchanges are required to record their customer’s identities before they could start trading on the website. This creates a centralized server that store records of personal information, which defies what Bitcoin and blockchain were meant to achieve.
A decentralized exchange on the contrary, promise to resolve this mismatch by cutting the middleman. DEXs do not rely on third-party services to store their customers’ digital assets, customers are in full control over their fund without having to worry about being hacked or server downtime; they can also trade directly between themselves on the open and transparent network, fully leveraging the perks of blockchain.
Yet the application of DEX is still at its infancy, it only supports basic market functions at the moment, users also cannot trade by fiat currency as DEX doesn’t verify user’s identity. They also have poor liquidity and lack of advanced trading tools comparing to centralized exchanges, such as margin trading or leverage. DEX is not for everybody, if you are not buying a large amount of tokens or trading ICOs, you would be better served by the conventional centralized exchanges.
What’s next for DEX?
There are still major technical hurdles for DEX to move forward, but without a doubt, DEXs will play a key role in the adoption of blockchain and cryptocurrencies. So far we’ve seen the popularity of it increasing lately, where a lot of crypto exchanges are planning to venture into this zone. OKEx will soon be introducing our own blockchain (the OKChain) along with a decentralized exchange (OKDEx) as well. Currently, the OKChain is at the final development stage and we expect to launch it on a testnet in June this year. By that time, you will be able to trade OKB coins on the OKChain.
Ultimately, DEX and centralized exchanges serve different purposes and different traders’ needs. Understanding how they work can definitely make trading easier, cheaper and more secure for you.
Risk Warning: Trading digital assets involves significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.
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