The four core roles of any exchange are Order matching, Capital deposits, Order books, and Asset exchange. To create a fully decentralized exchange, each of these functions should be fully decentralized.
Typically on cryptocurrency exchanges, the asset exchange part is decentralized by default. The assets are cryptocurrency; the other three functions, mainly deposits, are usually centralized due to Know Your Customer and anti-money laundering regulations. Exchanges are required to seek user’s identities for any capital deposits. This is stored on a centralized server that holds your personal information and exchanges with any form of databases or servers, allowing the user to access the cryptocurrency market.
While the decentralized exchange gives you access, a decentralized exchange cannot shut anyone out. The most apparent benefit of a DEX is the same with any decentralized application the censorship resistance. Any application built on a decentralized blockchain can’t be shut down unless the entire chain is shut down. Decentralized exchanges require the users to be 100% responsible for and in control of their funds.
Dex’s are undoubtedly an essential part of the future of cryptocurrencies and are already a significant help for people in restricted countries that want to access the blockchain ecosystem with more growth and development time. DEX’s will be advanced and become a better option against traditional exchanges.
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