Decentralized exchanges (DEXes) are becoming increasingly popular, and for a good reason. They offer many advantages over centralized exchanges (CEXes), including more privacy, reduced risk of fraud and hacking, lower fees, and increased user-friendliness.
However, there are still some challenges that DEXes must overcome before entirely replacing CEXes as the primary method for trading cryptocurrencies.
DEXes provide more privacy
DEXes provide more privacy than centralized exchanges because they do not require personal information, registration, KYC/AML compliance, a bank account, or even a credit card. However, they expect users to own cryptocurrencies already. Fiat on-ramps are hard to come by through decentralized exchanges.
DEXes reduce fraud and hacking
Another benefit of DEXes is that they are more secure. Because they are not centralized, there is no single point of failure. As a result, the network’s security depends on many nodes instead of just one.
Additionally, DEXes do not store users’ funds. Instead, users are in charge of their private keys, and their coins always remain with them. If a hacker were to gain access to a centralized exchange database, they would be unable to steal coins because they aren’t stored there in the first place!
DEXes also reduce fraud and hacking by eliminating third-party intermediaries such as banks or payment providers who can be susceptible to cyber-attacks themselves.
Using a decentralized exchange means never having your money held by anyone else again. In addition, it improves security massively compared to traditional exchanges where you hand over control over your cryptocurrency assets.
Fewer fees
The most apparent reason for the rise of DEXes is the lower fees. Unlike traditional centralized exchanges, where users pay a fee to trade or withdraw funds, DEXes operate by an entirely different model. Rather than paying a third party to facilitate your trades and withdrawals—an apparent conflict of interest—you’re responsible for these actions yourself.
No matter how much money you make on the exchange or how much value is stored in your account, you won’t be charged any fees. Some DEXes offer maker/taker fees. However, even then, they aren’t quite as high as those charged by centralized exchanges (0-0.25% versus 0-1%).
If any fees are associated with using cryptocurrency trading platforms, it will likely only be small amounts when you convert back into fiat currencies. However, that could easily change in future years if things continue trending upward!
More user-friendly
If you’re not already familiar with decentralized exchanges, here is a brief overview. DEXes are peer-to-peer cryptocurrency exchanges that allow you to trade coins directly with one another. They are often considered more “decentralized” than centralized exchanges because they do not hold custody of your funds and, therefore, cannot freeze or confiscate them. In addition, anyone can use DEXes without creating an account or verifying their identity first.
The most significant advantage of using a DEX is its user experience (UX). Because users exchange directly from their wallets, there aren’t any intermediate steps or other processes involved in completing transactions on this type of platform. Instead, everything happens within the app itself.
Another benefit is that most DEXes offer cross-chain swaps (exchanging one cryptocurrency for another), atomic swaps (taking place across different blockchains), messaging between traders before agreeing on terms, etc.
Conclusion
Decentralized exchanges have many advantages over traditional centralized exchanges.
Their decentralized nature means you don’t have to entrust them with your funds, and they are more secure than their centralized counterparts.
They also come with fewer fees and are more user-friendly than traditional exchanges because of their features. As a result, DEXes might be the future of cryptocurrency trading!
The post Why Are DEXes So Popular? appeared first on CryptoMode.