Bitcoin Forum

We've seen the past events from centralized exchanges like Mt. Gox and Cryptsy become hacked, resulting in massive losses, thus scaring away new people to get into cryptocurrencies.

Now, what if people could start trading on decentralized exchanges based on blockchain technology, which is more secure?

The reason why DEX like OpenLedger hasn't gain much traction it is because of the lack of liquidity. This makes me wonder why people still trust centralized exchanges when they are subject to manipulation, hack of funds, and many other factors.

In my own opinion, as more centralized exchanges become hacked, people will then switch out towards decentralized ones when they realize the security and reliability it provides.

Nevertheless, I would like to know your thoughts about this. It would be very interesting to see the majority of altcoins to gain traction on these markets, in order to increase liquidity and volume, thus making centralized exchanges obsolete over time.  :)

i think the main problem is that you need the fastest response times possible to attract daytraders. You can't really manage that with a decentralized system at the moment.

Technically speaking, the way decentralized exchanges work, you will always have a high trade latency. Most short-term traders prefer to rely on a centralized entity for faster and more accurate trade execution, and since they are the ones providing liquidity, they are more attractive to occasional and long-term traders as well. Liquidity on exchanges is analogous to the network effect, it's hard to get started but then the value grows exponentially.

It is a chicken and egg problem. Once you have sufficient liquidity, the spread would decrease and more traders will be attracted to decentralized exchanges. Right now, I think people are complacent. They typically believe they won't be Goxed again.  ;D

Just wait till they get Poloniexxed........then maybe....

There was so much talk about this a couple of years ago and we have not come very far since then.

it's just easier to use and better "advertised". A few investors in this market simply buy bitcoin and send to poloniex, they dont even know about websites like marketcap or bitcointalk, much less a decentralized exchange.

A DEX needs market makers embedded into the platform, that's what SuperNET is doing with their InstantDEX, they've got built in trade bots that'll provide instant liquidity for all markets.

Do you envision it for the future where it will be faster to get fiat in and out and to conduct trades?

first problem i think is lack of awareness/advertisement for these things. for example i never knew there is something called decentralized exchange until recently and until now i don't know how many are there and which is which and how each of them are!

and i also checked some of them out and they don't seem to be offering the same features i get on regular exchanges. and there is always issue of fiat trading.

Ya man, too bad it's vaporware built on buzzwords.

There are multiple, complex, fundamental reasons why p2p exchanges and markets fail to develop liquidity...
So it's MUCH easier to just sell you tokens, man... here, buy some more tokens with a cool name.

I think without a centralized entity, it is impossible to have the fast response times you need, at least in the forseeable future. Any cryptocurrency needs validation by multiple instances, otherwise, you could screw the system hard.

A possible solution might be a way of IOU trading, where traders bind their coins in smart contracts that are managed and secured by multiple instances, while the trading itself is managed by a centralized entity, which provides an open, but centrally managed ledger.

Every few minutes, maybe 10 minutes, mabe 30, a snapshot is made, gets approved by the instances mentioned above and coins are being moved based on this snapshot. Ideally, this would function as a "killswitch": in case the central entity is attacked, the decentralized instances can shut down the transactions of coins, minimizing the amount of damage that can be inflicted.

Not to plug too hard, but this may be some usecase for this:

https://bitcointalk.org/index.php?topic=1689947.0

That is certainly true. But if this system could become improved, then it would definitely take over the centralized exchanges with far more better security and scalability. As Bitshares claims that it could be capable to handle lots of TPS, then I have no doubt that OpenLedger would be able to handle real time settlement.

It is only a matter of usage and most of all scalability, to help these systems grow and become used in the mainstream world. Just my opinion.  ;D

the funny thing is that poloniex was hacked already and this made it even more trusted now, so people will not give up on trading there very easily


couldn't be done by bot? if two that are trading in a decentralized exchange, which is no different than trading on a forum in the merchant subsection of the alt section for example, and both run a bot for their trading they will get a fast response on their trading activity

I made a suggestion above:

get the funds secured in a decentralized way, let a central entity handle the trading "on paper", then every XX minutes, a snapshot is made, which is checked by the decentralized entities controlling the funds, which send funds according to this snapshot, provided they don't find anything wrong.

I created this thread with the same question: https://bitcointalk.org/index.php?topic=1513568.0

Liquidity has become much better on the dex over the last few months with active trading bots now working the spreads.  On the flip side when watching the chat box, new users are very overwhelmed by what they are looking at.  From the simple, where is the login button and how do i reset my password etc...

Yes, but liquidity is still Beta tester and untested safety, although it has become better on the dex,
Still there are no many people who use it.
The traders will be doubt use it, because it is because of money large of money, they will make sure put the money on right place and safe.

One way to overcome some of these trading barriers is to follow the example set by Alcurex Exchange, where you can see they have created a platform that is secure, and allows for remote trading, thus enabling options for high liquidity.

What do you guys think?  Is this a good solution for liquidity?

There are only a few people that really care about decentralization. The vast majority will not care and rather take the risk of losing some coins than having to go through more trouble to make the trade.

When the technology matures more and the speeds increase, we might see an increase in adoptation.

InstantDEX is finished, you can check jl777's code right now and test it even, just waiting for the gui,  like monero.

Not a bad idea, mate. This is could be a solution towards the security of the exchange's funds. However, I think that having a fully decentralized exchange would be better as there would be no central operator behind it, it will implement the security of the blockchain, and well as having full transparency of every trade made on it. Just like Bitcoin where there are no middlemen, company or central authority behind it, the decentralized exchange could be similar in a way to provide fast settlement, security, and a trustless system.

If decentralized exchanges like OpenLedger could become popular, then it would really take down on those regulated, centralized exchanges. In my own opinion, as more centralized solutions face issues such as hacks and theft, more and more people will realize the true potential of decentralized solutions, thus making it a safe and secure way to trade with no central operator, fast settlement, and no single point of failure. Just sharing my thoughts.   ;D

This is correct.  The current "exchanges" simply become gateways into and out of the system.  It's a win-win for everyone as the exchanges still collect their fee's while also becoming less of a hacking target.

OpenLedger is a perfect example of this by them having their own open.assets while also allowing deposit/withdraw capability via fiat/crypto/etc...

User's also benefit.  Main example is say Openledger decides to close down without notice.  Another gateway can simply accept your open.asset and exchange for theirs or the actual asset.  You are always in control of your assets.

Exactly. That is the huge advantage of having a fully decentralized exchange using blockchain technology. Instead of using the common centralized exchanges which are subject to hacks, and are vulnerable to single points of failure, decentralized exchange could take the lead as they are a hundred times more efficient and secure. The only thing needed, is wide spread acceptance and usability to keep this concept going.

It would be neat if I could be able to trade most popular altcoins on DEX like OpenLedger, but I'm afraid that it would take a long time before people realize the true potential of these systems. Just my opinion.

By the way, I'm wondering if decentralized exchanges are subject to regulation when it comes to trade fiat against any other cryptocurrency. As centralized exchanges, must comply with KYC/AML regulations, it makes me wonder whenever decentralized exchanges could be easily regulated if operating via the blockchain.  ::)

Price discovery seems to be pretty inefficient on decentralized exchanges

BTC38 hacked?

http://news.8btc.com/exclusive-btc38-hot-wallet-got-hacked-and-lost-1-5-million


If true, just another reminder why the dex is worthwhile.

I think its fake, any confirmation?

I also would LOVE to know this. Services like bitsquare are out there available to the public and have no real support from crypto currency users.

As some have pointed, in order to attract volume, you need to please the needs of day traders. No exchange is ever going to be big without day traders. Without fast speed movements all you get is a marketplace.

Apparently we may find a solution with the lightning network. We may be able to figure a way out to get a decentralized high velocity exchange. Exciting things in the coming years for bitcoin. Let's just hope we can get segwit as soon as possible.

If this is true maybe we should be buying NXT.

That is certainly true. While fast settlement is key, to help make the trading process smoother and efficient, decentralized exchanges can soon gain traction as more people start using it.

I have the feeling that the concept of a DEX will improve over time, rendering centralized exchanges with middlemen or central operator a thing of the past. Take a look at OpenLedger, InstantDEX, and EtherEx. They are all good decentralized exchanges with huge potential to change the way you trade cryptocurrencies. Just my opinion.  ;D

We see here how far we got away from true crypto.  People are complaining about LATENCY when trading crypto tokens with a block period of 10 minutes !  The idea that a "bitcoin" can be exchanged 50 times between two successive blocks illustrates the ridicule that trading has become as compared to the original idea of crypto, which was to have "free (as in freedom) money on the internet" to buy and sell stuff.

An exchange should only have been a thing where you could exchange fiat for crypto, to use that crypto (and eventually, to exchange back crypto to fiat if you needed it).  Turning crypto into an exchange IOU fest where most of the volume is done off-chain, at higher "transaction" speeds than the block rate, has totally killed it.

We will never fully get the full decentralized experience until we get the lightning network working, possibly with segwit too in order to avoid certain problems... so we are maybe looking at 2 to 5 years until we have decentralized exchanges that can finally replace poloniex and whatnot. Of course, im speaking about crypto->crypto exchanges, I don't see how fiat->crypto exchanges can ever become decentralized since you still depend on the banking system.

It may seem so. In order to have fast settlement, then there needs to be viable scalable solutions that would help ease the process of trading cryptocurrencies.

Until we get enough consensus for SegWit to activate, decentralized exchanges will not grow that much in terms of liquidity and user attraction. We should give it a couple of more years, until the technology matures and becomes more usable. As more people become victims of hacks on centralized exchanges, they will turn themselves into decentralized solutions which provide the security and stability of the blockchain.

It would be very surprising to see decentralized exchanges to overcome centralized ones like Poloniex in the future. Just my opinion.  :)

Decentralized exchanges will get a lot more attention with the Chinese exchanges being outlawed, and as it happens in other countries.

One of the big problems seems to be trust. What limits many of the current crop is that you have to have some token of trust in the system based on prior trades (which new traders don't have, and anyone can cheat on their first big transaction), or one has to put up collateral, which many don't have, or there is a limit in volume one is allowed to trade. So the exchange needs to be able to receive and send each of the currencies to the users. Is there a way for a decentralized exchange, who is acting as the middleman, to do that?

The biggest issue that i think p2p exchanges have is the user experience. Alot of these are new and not as easy as a normal exchange. But in 2-3 years ALL exchanges will be decentralized.

It just has to do with the amount of people using them. They typically do not have the same resources as centralized exchanges. HEAT is a great example of a DEX that is small but growing. They have an active community and work to add pairs on a regular basis.

Honestly I think that people are just afraid to use them, because in case of a fall of the exchange they are afraid not to find someone to blame.

Liquidity issues are constantly being worked on by good DX products. Partnerships are being made to where orderbooks can be shared across both decentralized and centralized platforms - like this with Blocknet (BLOCK) and Bitfinex's Ethfinex https://medium.com/@theblocknetchannel/blocknet-to-integrate-with-ethfinex-b9f11f57a8bc

Also, bots can be run on the DX to help the order matching process including the ability to place all differemt types of orders that you typically find on centralized exchanges.

The technology is already working for these DX's like the Blocknet - check out their trade videos on their Youtube channel... it's really impressive stuff

This is not possible at the moment and I think won't every be possible. There is only a semi centralized organization I know, which is Lykke. It started as an ICO

Decentralized Exchanges: Why do they lack liquidity?

Why??

because it is so slow.

Sometimes the order struck in the board for a while and the transaction already doomed.

Agree main issue is slow trading and lack of BOT development for decentralized exchanges.

Even bitshares exchange is 3 second blocks and lack of good API makes this difficult (with some exceptions) to BOT on currently. Bitshares is probably doing the best out there currently. 3 second blocks could work, but anything waiting 1 hour for trades like XCP for btc confirms is totally hopeless.

One day hopefully there is a decentralized exchange with millisecond trading. Maybe via lightning.

Yeah. I've noticed the difference of speed between centralized and decentralized exchanges. So far, with the speed and ease of use of centralized exchanges, people tend to use it more for their daily trades.

However, with the inherent flaws of centralized exchanges like hacks and loss of funds, people may switch to decentralized solutions when they become improved in the future. One thing for sure, is that decentralized exchanges open up a pathway towards the ability of trading any asset without middlemen, providing many benefits that outweights those of centralized ones.

Therefore, with the integration of Lightning Network and other improvements to come along for decentralized exchanges, they will become the future of trading safe from hacks, and theft, giving power to the people once more. Just my thoughts ;D

I think at some point we will all be using decentralized exchanges, and it's going to be for the better.

Agree. There has been a series of hacks over the course of Bitcoin's history which makes people think twice before depositing their coins into a centralized exchange. In this sense, I think that soon people will migrate to decentralized exchanges as they provide greater security and availability than centralized solutions.

A decentralized exchange has no single point of failure, and it's available 24/7. With the lack of a central operator, the risk of losing your funds is very minimal. Therefore, as more hacks and security risks occur within regulated, centralized exchanges, people will eventually switch to decentralized exchanges and increase their liquidity.

Right now, there are many good decentralized exchanges available like BitShares DEX, 0x Exchange, OpenANX, and even EtherDelta. The benefits of these exchanges are greater than those provided by centralized solutions, making them quite attractive among many crypto-enthusiasts like me. Just my thoughts ;D

Because of speed and not as user friednly as centralized ones. But many working on both and new liqudity methods.

There many exchanges that got hacked not just one or two and the amount of money being lost is tremendous. I don't know why people still rely on a centralized exchange, they make themselves prone to be hacked, and the support center is shit, many people wait over a month for a simple solution.

The decentralized exchange also had many benefits in the technical aspect, I mean its really fit with cryptocurrencies scene, where privacy and anonymity is essential.

Agree. Centralized exchanges have many flaws inherent within them, which makes it unpractical to trade cryptocurrencies there. They often become hacked, and their customer service takes months to solve your issues. (like Coinbase and Bittrex support) Given the huge amount of money that have been lost over the past years on centralized cryptocurrency exchanges, I think that people will begin to look out for decentralized solutions that would keep their coins safe from theft and hacks.

With decentralized exchanges, we would never have to worry about the exchange operator running with your coins or getting your coins robbed since they operate autonomously and distributed among many computers. There is no single point of failure, and people could trade cryptocurrencies freely.

Until today, there are many people which still rely on centralized exchanges probably because of regulatory compliance. But, I believe that as more security threats occur on these traditional solutions, people will begin using more decentralized exchanges than centralized ones. Once this becomes a reality, then we could expect to see more liquidity in decentralized exchanges to make cryptocurrency trading practical in them.

Most recently, EtherDelta has gained a lot of popularity, and others like Bitshares DEX, OpenANX, and 0x exchange will begin to follow. The future lies with decentralized, autonomous trading of cryptocurrencies with no middlemen or third-party involved. Just my opinion :)

The few Decentralized exchanges i have tried my hands on are not easy to walk around.
This has a way of discouraging would-be users or investors.

Because decentralized exchanges arent not so easy to use like bittrex,binance,and poloniex.

Don't forget WAVES, a sleeping giant...

They updated their DEX and try the new one (on next link by selecting "online client beta"...) :

https://wavesplatform.com/

They will update the client as well in the near future...

At least a coin with a good working product, sure 2018 will be the year of Decentralized Exchanges...

Yeah as compare with the other Waves' DEX is good with it's speed and interface. But there is not much of liquidity.

Yes. Waves also implements a decentralized exchange that allows anyone to trade tokens or coins freely without the middlemen. It makes a great addition among other decentralized exchanges in existence such as EtherDelta, OpenANX, and BitShares DEX. Thus, the more decentralized exchanges emerge, the more options people will have towards making the switch from traditional exchanges.

I believe that as more hacks occur in centralized solutions, people would have no choice but to begin using decentralized exchanges. They are much more secure, free from third party interference, and faster. All they need is liquidity, and they could make strides in the mainstream world.

In the future, centralized exchanges will become outdated as decentralized ones take the lead. The competition would become fierce as new DEX emerge, but only those which could deliver the most liquidity will prevail. Just my thoughts ;D

My experience with Etherdelta is trades are frustratingly slow and ethereum network fees are high. There is a fee to deposit funds. There is a fee to place and order. There is a fee to make a trade. There is a fee to withdraw funds. To even get a transaction through in an hour you need to up the gwei and gas limit. I think the key to decentralized exchanges is the speed/fees of the underlying blockchain. Ehtereum is not able to handle the speed needed just yet.

Exactly. That's the point with Ethereum and other smart contract platforms. Their slow speed and transaction capacity make them unable to handle mainstream applications such as decentralized exchanges. Maybe that is the reason people have been using more centralized exchanges than decentralized ones.

However, I believe that all of this will end especially in Ethereum, as it upgrades its protocol towards PoS and adopts the Plasma Framework. It will become a huge boost to smart contracts, and decentralized exchanges like EtherDelta will benefit from that. One this becomes a reality, then there could exist a huge potential for EtherDelta to become a true rival against centralized exchanges.

Nevertheless, the value proposition of decentralized exchanges would be security, low cost of fees, and lack of middlemen. It greatly surpasses the benefits provided by centralized exchanges, and I believe that people will make the switch soon as they realize the true potential that decentralized exchanges provide. Just my opinion :)

Very good question here and I see alot of good answers already. I think the same and time will speak again for sure that as some point a new exchange will get hacked and for there this time people will understand that we need to step away from centralized exchanges and step into the decentralized ones because only like this we can trade with privacy.

Decentralized exchanges lack liquidity because of the technical nature that they have - the coins are decentralized, in their owners' wallets, and so the move slow. Moreover, many people use trading actually for gambling, and this works better in centralized exchanges, so volumes are bigger there.

If this is the case, maybe we will only get high liquidity once the lightning network and cross-chain atomic swaps are implemented, since the limiting factors are transactions and fees. However, a centralized exchange will always be able to provide lower fees since they do trades internally.

There will also be some workarounds. I read about a company using ethereum smart contracts to create simulated portfolios that hold the coins one wants, but not in reality so it is safe, and then the company will do some exchanges on the back end to give everyone their return. The ether that maintains the portfolio is in a smart contract, so not held on a centralized exchange.

Which decentralized exchange has the biggest trading volume at the moment? I tried Bisq yet. Are there other usable alternatives?

Yes. As more centralized exchanges become hacked over the course of time, people will have no choice but to adopt decentralized solutions. It has become evident that centralized exchanges are vulnerable to hacks, theft, and even government regulations. Thus, shifting trades to decentralized exchanges would make it much more difficult for hackers to perform an attack (since there is no single point of failure), as well as the implementation of government regulations (in the case of China trying to stop cryptocurrency trades).

It will only become a matter of time before decentralized exchange become improved over time in terms of speed, liquidity, and efficiency to overcome centralized exchanges. The whole purpose of cryptocurrencies is the decentralization of finance, and what better way to do so by decentralizing trades in the mainstream world? Therefore, in the future, I believe that decentralized exchanges will become dominant in crypto land. Just my opinion :)