Decentralized exchanges - DEX - are a place for concluding transactions related to goods, currencies, and securities, operating on the principle of a P2P network or blockchain technology. At its core, it is a platform for finding matches on requests for the sale and purchase of certain goods. There is no central server, management is carried out collegially, there are no servers where participants' funds are stored either. All transactions are carried out without intermediaries.
What is important - there are not so many completely decentralized exchanges. Most still have a central server, to which both the main interface is connected and data about all requests are stored. But private keys and real cryptocurrency assets are stored exclusively on user's machines.
The main differences
Each decentralized exchange is a specially adapted blockchain technology - that is, a special way of decentralized storage of information and work with it. Since no main server is needed for its operation, DEX is more resistant to a variety of hacker attacks and software failures.
The only possible vulnerability is smart contracts, which serve as guarantors of the security of transactions. Alas, they can also have several vulnerabilities.
All decisions regarding the development of decentralized exchanges and changes in software are decided collectively - by a majority vote. Decentralized democracy in action.
- Almost complete anonymity of users. There are no personal accounts, so you don't need to go through various checks and provide confidential data. However, when exchanging cryptocurrencies for fiat currencies, a variety of verifications may be required.
- The impossibility of blocking an account, forcibly withdrawing assets from the account, or blocking them. Both by internal mechanisms and by the influence of the authorities.
- Full control by users of their accounts, as well as their cryptocurrency assets.
- Complete transparency of transactions. Everyone can find out exactly where his money goes.
- No abuse on the part of the management, since this is not foreseen in principle.
- Lack of a single entry point through which hackers can influence the system as a whole.
- The absence of many options that greatly facilitate the work of traders - stop losses, margin trading, landing pages, and many others.
- Smaller trading volume and liquidity pool due to a smaller volume of active users.
- Lack of support. There are no specialized consultants outside the central administration. You will have to look for information yourself.
- Failure to work with cryptocurrencies that are not tied to smart contracts.
- The irreversibility of the conclusion of transactions. There is no forced cancellation mechanism.
- Lack of legislative regulation.
- Slower work speed, especially compared to centralized ones.
At the moment, decentralized exchanges are a pure niche product. Only those who have a good understanding of the peculiarities of doing business in the world of cryptocurrencies prefer to work with them, are not afraid to be fully responsible for their actions, and take risks. As for the majority of ordinary users, they are not satisfied with the complexity of the interface, the relatively low speed of work, and the lack of the usual functionality.
Nevertheless, many centralized exchanges are slowly adding to their functionality the capabilities of decentralized exchanges, turning into a "mixed version". With and without the pros of each approach.
In any case, most modern projects are in a growth phase and do not plan to suspend their activities. This means that DEX has a future.