What Is A Decentralized Exchange, and How Does It Work?
Being new to the cryptocurrency scene can be overwhelming! We understand because we were once rookies too, in a galaxy far far away...
The learning curve can be quite daunting with so many new buzzwords being thrown around, not to mention keeping track of your favorite coins and exchanges. Totle aims to make cryptocurrency learning, as well as management of your portfolio, as easy as pie! There are always many questions out there, but one of the ones we get most is “What is a DEX (Decentralized EXchange)?”. Follow along as we break it down for you in absolute beginner terms that you WILL understand!
Go Decentralized
To first understand what a decentralized exchange is we first have to have a basic understanding of what “decentralized” actually means. In the case of cryptocurrency, decentralized means a network of computers or “nodes”. These nodes maintain a copy of the same data and are interconnected to form a network. Instead of a traditional centralized server where all the data is kept in one location, a decentralized network keeps the data with the people who use and support it. Of course there are rules that govern how these copies of data all sync together, but typically a full consensus must be reached at all times for things to work smoothly.
DEX As The Next Step
Now that we understand what a decentralized network is all about we can dive into decentralized exchanges. A decentralized exchange, or “DEX” for short, is a way to exchange and transact cryptocurrency without the need for a third party like Coinbase or Poloniex. We tend to deal with mostly “centralized” exchanges often but the direct peer to peer transactions of a decentralized exchange have additional benefits.
In comparison to a centralized exchange, a DEX has superior security. We have seen a string of exchange “hacks” this year and this will only increase as more people adopt cryptocurrency. A DEX is virtually unhackable! This is due to the decentralized nature of the storage of data across multiple nodes in the network. Not only are they a tough nut to crack they don’t require any identification or verification. Decentralized exchanges are anonymous and work on a “trustless” format. When you transact on a DEX you are putting the money back in the user's hands instead of a 3rd party. On top of this, because a DEX works on a distributed server, there is almost no downtime! Of course there are a few downsides as well, mostly the fact that a DEX has much lower liquidity than a traditional exchange and also tends to be a little harder to use. But still worth it!
List Of Decentralized Exchanges
Here is a short list of a few of the most popular decentralized exchanges.
Kyber Network -
https://kyber.network/EtherDelta -
https://etherdelta.com/BitShares -
https://bitshares.org/Waves Platform -
https://wavesplatform.com/Open Ledger -
https://openledger.ioDecentralization has always been the true cornerstone of the ethos of crypto and these decentralized exchanges are ensuring that the future becomes as it was always imagined.
