Anyone purchasing cryptocurrencies will almost certainly need to utilize an exchange. Thousands of trading platforms have sprung up to serve the rising community of cryptocurrency users as cryptocurrencies have grown more mainstream in recent years.
Users of cryptocurrency exchanges have had continuing concerns over the years, such as hacks, lost cash, and irresponsible operators. Seven large-scale assaults against exchanges occurred in the first six months of 2019, leading to the theft of tens of thousands of dollars from consumers. This cash is frequently lost and will never be retrieved.
Decentralized exchanges (DEXs), which provide many benefits over previous centralized exchanges, have risen in importance due to issues like these. Why should you use one instead of a centralized exchange?
Large sums of money are held in centralized exchanges, rendering them a potential target for cybercriminals. Centralized exchanges are now more appealing to cybercriminals with the rise in cryptocurrency trading activity. The decentralized crypto exchange are becoming increasingly user-friendly and widespread while also improving investor security.
Many countries classify centralized exchanges as money service providers (MSPs), which means that users must pass necessarily know-your-customer (KYC) and anti-money laundering (AML) procedures. People are often hesitant to give their personal information to third-party businesses because they have no control over what happens to it or which authorities, domestic or international, obtain access to it.
On the other side, decentralized exchanges are not governed by a central authority; as a result, there are typically no registration requirements other than possessing a wallet address to use the exchange.
Obvious the full control of your money is on your hands
Cyber-attack isn’t the only problem with centralized exchanges; consumers don’t have entire control over their cash in these situations, but the centralized exchanges do. This might result in various restrictions and even monetary loss for investors.
A certain cryptocurrency exchange began suspending customer accounts in January of this year, ostensibly in preparation for a planned event in which users would withdraw all of their cash from centralized crypto exchanges in a single day. The “Proof of Keys” incident was an attempt by the crypto community to guarantee that exchanges could make good on deposits in the same way that a bank run would.
Because DEXs are non-custodial, you have complete control over your funds, and no central authority may freeze or restrict your access to them. Your Money will be impacted if the trade goes down tomorrow since you have kept custody of them.
Numerous centralized exchanges have limited access to customers in specific countries due to increased regulatory pressure. Exchanges have lately started withholding services from US consumers owing to the danger of being perceived as offering unlicensed securities trading. IT was reported in June that it will geo-block US users from its platform in preparation for the launch of its US-specific compliant exchange. Bittrex, for example, has delisted several Money from customers in the United States.
Because they are not administered by a centralized body that may be shut down, decentralized exchanges allow anyone from all over the world to trade cryptocurrencies. Peer-to-peer transaction fees are substantially lower than regular exchanges, and investors can spend as little as they desire to gain from trading activity.
The decentralized crypto exchange notion is still gaining support as the cryptocurrency community acknowledges its merits in the wake of recent centralized exchange breaches and mishaps. Overall, though, the DEX is a better match for cryptocurrency and blockchain’s decentralized worldview. It may only be a matter of time until the advent of the DEX relegates centralized exchanges to the dustbin of history.