ORGINAL: https://mastercalls.io/how-to-use-decentralized-exchanges/
As we have seen in the recent past, many cryptocurrency fellows believe it is hard or complicated to use so called "decentralized exchanges" (short: DEX). Thus most traders not even try them out and still rely on centralized exchanges. In fact DEXs are absolutely easy to use and they are generally not more complicated than conventional centralized exchanges like Bittrex or Binance.
Because of this we would like to show you how to get started with DEXs.
Skip the blabla and go to "Getting started"!
Anyway, the Mt. Gox debacle highlights the high potential risk of using unregulated centralized exchanges: You have to trust them, because you have to transfer your valuable funds into a foreign systems outside your control and maybe even outside of the jurisdiction of your home country!
As you may have experienced yourself, if one of the larger centralized exchanges simply has some bandwith or server issues (which just happens from time to time) the crypto-community is becoming nervous as hell. They fear to see another Mt. Gox debacle and to lose all of their deposited funds.
The most important benefit of a DEX is just this: There is no single point of failure! Another Mt. Gox scenario is virtually impossible.
The following list summarizes some of the benefits a DEX has against centralized exchanges:
In the center you can see the BitShares Exchange Blockchain. This blockchain is used for all transactions (orders, order book, trade executions, deposits, withdraws, accounts etc.).
Next to that blockchain you can see so called Gateways "running on" the BitShares blockchain. A gateway can be imagined like the gate through which external cryptocurrencies can flow into the BitShares Exchange.
If you deposit some cryptocurrency funds through a gateway, the gateways will accept the amount of coin and add the amount as a plain number of the corresponding Smartcoin to your BitShares wallet (see next chapter).
The DEX clients (e.g. on your PC or smartphone) are connected to one of the gateway nodes. Simply said this DEX client is just a graphical user interface for using the DEX blockchain and can be a web application in your browser or a native application installed on your PC or smartphone.
Because everything is done on a blockchain you also have to pay the usual transaction fees (very low compared to centralized exchanges) for placing orders and moving funds around. These fees are paid in the BitShares currency with symbol BTS. It is also used as collateral for loans and margin trades.
A very similar procedure is done by centralized exchanges, where your deposited coins are collected in a common exchange wallet and your account balance gets credited the corresponding amount. This "plain number" is then used for trading. As soon as you withdraw the coins again, the withdrawn amount is substracted from your account balance and the coins are transfered out of the common exchange wallet.
In BitShares this is done by gateways and smartcoins. For e.g. if you deposit 2 BTC through a gateway, the gateway provider will accept your deposited funds (the 2 BTC) and credit the same amount (2) of the corresponding smartcoin (something like openBTC or bitBTC) to your BitShares wallet.
The following diagram should illustrate the deposition of 2 BTC from a BTC wallet to the BitShares wallet:
A smartcoin guarantees that you can redeem (withdraw) your real asset anytime through a gateway.
Different gateways issue different "altcoin-smartcoins". Usually
The first part of each smartcoin symbol (e.g. openBTC, bitBTC) indicates the gateway used. For expample "open" indicates the OpenLedger gateway, "bit" the BitShares and so on.
For this tutorial we used BitShare's own exchange implementation, the BitShares Exchange. But you can also use the exchanges of other BitShares gateways like CryptoBridge (is issueing many new altcoin-"smartcoins"), OpenLedger (very smooth UI) or RuDEX. They all use the BitShares blockchain and the local wallet we create in this tutorial can be imported in each of them! You are also able to use the RuDEX interface to trade for e.g. CryptoBridge coins.
Note: If you are using the browser exchange, then you are using is a large javascript based web application (written in reactJS), so it could take a few seconds to load and show you the following screen.
Give it some time to load and initialize.
In the shown form you have to enter a username which contains a number, e.g. username123 and a password.
This password is used to encrypt your wallet as you may know it from other coin's wallets. So keep it safe!
Congratulation! That's all!
Generally you are done! You have created an account with a local wallet and can start depositing funds and trade them!
The next steps are optional but recommended. You should now go into the settings and backup the local wallet.
Then click "Backup" on the left side and select "Create local wallet backup".
Download the *.bin file and save it in a safe place. E.g. copy it on multiple usb drives and place them in different locations.
Additionally or alternativley to storing the local wallet file you can create a local wallet brainkey.
The brainkey consists of a number of words which are the human readable repesentation of your wallets private key, also known as "seed" or "paper wallet" from other wallet applications.
Write these words down or print them out and store them in a safe place.
