DEX (Decentralized Exchange) for Beginner, Know the Advantages and Strengths of DEX

In this article, we will talk about an interesting topic namely Decentralized Exchange or better known as DEX. Before we started, have you heard of  Exchanger? Before we explained more about DEX, will be first explain the basics about Exchanger.

Definitely you know that if you want to trade using an exchanger, you must register yourself using email, create a very strong password, verify your account. Then you can trade on the exchanger.

Exchanger is a market place whereby, Traders can make Buy/Sell transaction using fiat currencies or altcoins. Often, the exchanger has a KYC or AML to operate legally. 

What is DEX (Decentralized Exchange)?

DEX (Decentralized Exchange) is a Decentralized Autonomous application or known as Dapps, which allows buyer or seller of cryptocurrency trading Buy/Sell, without having to release their funds or assets to the intermediary or person in charge.

DEX has been conceptualized to eliminate any authority or party supervising or approved the transaction made in a particular exchange.

Through Smart Contract, DEX handles Order Book automatically or Market Maker automatically. This allows it to be truly “Peer to Peer”.

The four important elements for developing an Exchanger are:

1. Capital Deposits

2. Order Books

3. Order Matching

4. Asset Exchange

In order to produce or create DEX or knowingly as Decentralized Exchange. All four the functions must be decentralized. This means that no one controls the system.

If you want to know, most Exchanger only exchanger assets are decentralized, which indeed cryptocurrencies assets have already been deployed within the blockchain, which no central entity controls it.

However, the other three functions especially Capital Deposit are centralized Architecturally. Decentralized means it does not have a server controlled by any party and its network nodes are distributed.

Among the advantages of DEX are:

• It does not share any data to third parties or intermediaries.
• Compared to Centralized Exchange which requires personal information such as email, evidence or proof of identity and telephone number when registering.

Anyway, DEX doesn’t need all that! If you want to know one of the biggest strengths of decentralized is distributed.

Among the strengths of DEX are: 

The first is Security, where DEX, does not hold users assets.

The second is Low Risk of Manipulation. DEX has very minimal risk of manipulation prices or trading volumes, because it has no centralized structure which it is controlled by certain parties. You should know that in DEX, there is no personal information or personal account. Then no verification needs to be done such as the email used before you log in to the system. With that, personal user data will not be stolen.

The third is Independent From Regulators. DEX architecture that has been distributed, protects the exchange from the intervention of local or international authorities. In contract to the Centralized Exchange, it must follow the regulation set by a country. This make the services offered by the Centralized Exchange limited.

The fourth is Accessibility For Different Project. In contract to the Centralized Exchange. DEX allows not only to place orders only on available cryptocurrencies. It also allows to create new crypto in the system. This allows startups or new project issue minimal liquidity without having to pay high fees to get placement in major platforms. Although Centralized Exchanger still dominates the crypto market and serve the needs of crypto traders and investors. 

Read also: Decentralized Finance (DeFi) for Beginner, Advantages of DeFi and DeFi Offer

However, decentralized provides a more attractive alternative. Even so, the DEX or decentralized Exchanger Platform is still in its infancy where its improvement should be made better based on users experience. Development for infrastructure and scaling mechanism as well as connection to financial institutions is also required for future adoption.

Reference: https://youtu.be/_DKShxZU3TI

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