Before the emergence of the decentralized blockchain system in 2008, the centralized system had been the primary method of carrying out financial transactions. This system was so structured to the extent that the buying and selling process had to pass through the central market exchange.
With the emergence of a decentralized exchange system, investors are now trading on the online market without a third party involved. This system has totally eliminated the middleman.
What is a decentralized crypto exchange?
A decentralized crypto exchange can be defined as the exchange and trading of cryptocurrencies without the use of middlemen or third parties. The use of the blockchain technology has been able to allow the direct flow of transactions between peer to peer in order to eliminate other intermediary central institutions. For the exchange to take place, one must be in possession of specific cryptocurrencies like Bitcoin, Ethereum or a few others before the exchange can take place.
The benefits of using a decentralized exchange
This new process in the exchange of funds has been welcomed by different businesses and institutions due to a myriad of benefits that include;
Higher security; One of the major reasons various institutions are racing towards a decentralized crypto exchange is due to the high level of security. The world of cryptocurrency has been able to ensure security levels. Some ways include the use of hardware security modules that safeguard cryptographic keys and provide a secure system for exchange modalities.
Also, the use of a wallet system (specifically cold storage) has given crypto traders the full assurance of the safety for their funds. Cold storage which uses an offline storage system helps keep funds and coins protected from online hackers.
Elimination of third-party control
Blockchain technology was designed to allow interaction between peers with the use of pre-programmed software without intermediaries. Normally, third parties like governments and other financial bodies who can control the way exchanges are carried out in the centralized system; however, this step has been totally eliminated in the decentralized crypto exchange. This has made individuals who have assets in crypto coins to have sole control of their funds and trade from the comfort of their location.
Faster transaction times
When bitcoin first surfaced within the first one year, its average time for completing a transaction was relatively fast than the centralized exchange system. But as more users and miners continually came on board, the transaction times for adding blocks began to increase. However, as more and more crypto exchanges evolved, transaction times have been improved upon. With the use of different Crypto exchanges, payments of assets and other transactions such as cross-border payments can be carried out in seconds. The issue of settlement of duties leading to delays is now a thing of the past.
Cheaper transactions
WIth a decentralized exchange, the issues of high hidden charges has been eliminated. Transaction fees have been brought down to the minimum due to the elimination of third parties. The charges are relatively lower than a centralized system with some only being implemented to keep the system running.
Diverse users
Not until recently has the modern day banking system become flexible when concerning making online. This was largely due to the high level of competition in the financial environment. The growth of this decentralized crypto exchange within ten years was largely due to the fact that it was open for everybody within the online community. Users all over the world, with the use of a smartphone and an internet facility, were able to access the crypto exchange system with ease. This system has broken the barrier of high bank charges in a centralized system and a variety of other factors that reduced the chances of accessing funds. The only protocol for this decentralized exchange service is an internet connection and a smartphone.
The anonymity of transactions
People should be granted the right to choose the amount of personal data they wish to disclose when it comes to funds. The banking process, when it comes to the centralized system, is always accustomed to collecting data and biodatas that can easily be used to track funds and possibly hack an account. But with the decentralized crypto exchange, anonymity is given to traders. That means you can decide the level of privacy you wish to have during a peer to peer crypto exchange. With this method, people can control their privacy and possibly ensure security within the network.
Instant tracking of payments
Tracking is made to deliver a high level of security of funds within any financial payment platform. This tracking has been designed with different tracking options depending on the platform. The decentralized crypto exchange method gives access to track funds immediately after the transaction as compared to other services. This tracking tool creates security for both the sender and receiver to track funds and possibly ensure trust within the payment system.
A wide variety of trading pairs
Trading pairs describes the trade between one cryptocurrency and the other. This pair can be BTC/ETH or ETH/LTC. This trading pair gives insight into how to achieve the least possible loss. Some decentralized crypto exchanges provide trading with a high volume of trading pairs that can be used as an effective traders guide.
Conclusion
Different schools of thought have given credit to the decentralized crypto exchange platforms for making the financial industry a competitive market and thus generating a lot of interest from various investors. While many still believe that this system will soon be a thing of the past, little do they know that a more dynamic approach is being researched daily on improving the decentralized cryptocurrency exchange process.
