An exchange allows you to buy and sell cryptocurrency through a convinient platform. Some are more user friendly than others. This where people go to in order to change to cryptocurrency. Recently, there has been an ongoing discussion about how contradictory these exchanges are. This is because the main exchanges are actually centralized.
First of all, it must be clear that one of the fundamental pillars of cryptocurrency is decentralization. Thus all the fuss about how the crypto market truly moves on centralized cryptocurrency exchanges.
The main problem is that everything is centralized on one server. This makes them extremely vulnerable to hacks. Bottom line is that they relinquish power to a third party, when in contrast cryptocurrencies were created to take out the third man.
Although these are alarming problems, centralized exhcnages were the firt and have become integral to the blockchain ecosystem. They hold the most liquid crypto markets, and are an easier access point for the newcomers.
Some of these exhcanges have failed, for example: Mt. Gox. This exchange was acked and around 650,000 BTC in funds were stolen which has had a significant impact on the market the past year.
Centralized exchanges continue to be the main choice for the community, however there are decentralized exchanges arising slowly, but surely.
A decentralized exchange is one composed by many servers. This means they do not rely on a third party, and that no one single organization or party holds access to the funds. They bring autonomy to the table. There are many solutions being developed to acheive the most functional decentralized exchange. Some have been built as a dApp using smart contracts, for example IDEX exchange.
The main benefit is clearly the trustless nature that such model brings to the exchange. There is nothing to fear since no one has any power over the funds. The coins simply belong to whom they correspond, and the system is run by everyone. Antother great plus is that since there is no one only server, there is no such thing as maintanence time or down server time.
Of course nothing is perfect. These type of exchanges have a long way to go. First of all, the market liquidity is LOW. I would say this is the biggest problem. Especially if for the traders in this market. The other major glitch is that they are not very user friendly at all.
So although there is still a long way to go, I believe the cryptocurrency market will continue shifting on over to decentralized exchanges. Stay on the lookout for the ones that are on the rise:
Also, remember that Binance is working on migrating onte the blockchain to become decentralized, and Bitfinex is working with EOS to creat EOSFINEX.
If you want to read more head over to these links:
Centralized vs. Decentralized exchanges
What is a decentralized exchange?
What do you think? Will the crypto space move on to decentralized cryptocurrency exchanges or will they remain on centralized platforms? Answer me in the comments below!!!!!!!
Til' next time,
-Ana.
