What is Decentralised exchange?
Decentralised exchange is a peer-to-peer (P2P) marketplace that links cryptocurrency traders and buyers to make exchanges without any intermediary. Decentralised exchange also means an easy payment process where users make transactions without the central authority. Contrarily, Centralised exchange (CEX) can not be operated the same way, in the case of CEX, payment is made within a centralised system and transactions can not be done directly between crypto traders.
While centralised exchange is managed by the rules of a financial institution, decentralised exchange is controlled by smart contracts.
ADVANTAGES OF DECENTRALISED EXCHANGES
Since its inception, DEX has been a payment solution innovated to shape the World’s financial system. With its several benefits, this blockchain feature has been inarguably accepted in different countries and continents, some of which are;
Cost Friendly
DEX is cost-friendly and cheaper compared to CEX, this allows users to make transactions without charges, maintenance fees, etc. Also because there are no intermediaries transaction prices can not be inflated, as opposed to that, gas fee is a blockchain transaction cost that is given to network validators in exchange for their services to the blockchain and DEXs follow the same GAS fee structure as the Ethereum blockchain.
Control
DEX is not control-oriented; users are not confined to a central body’s rules but are given permission to trade as much currency as they want to whoever they wish to without location restrictions. Also, financial institutions do not manage users’ funds or have the right to close down their wallets, users are responsible for the security of their assets. Ultimate access to wallets, assets or funds is given to blockchain users and crypto traders.
Security
Fraud cases across countries are circulating fast, and KYC processes allow users’ databases to be hacked. Relevant information about an individual can be illegally shared because there is a central body that has this record.
Privacy Private keys should not be disclosed and owners are responsible for the security of their assets by not sharing this key. Also for trading, the private key is majorly used to decrypt strings for bits sent by the trader.
