See What DEX Really Means

[Wenbing]

What's our parameters of a decentralized exchange (DEX)

The general idea of decentralization is simply no central control and as such the market forces regulate the activities of such system.

Now, a DEX is an exchange that has no central control and as such can't be censored.

But, here are what will form the basis of this discussion.

Here are some of the things DEX means.

* no central control.
* can't be censored or banned completely.
* use a blockchin technology.
* no use of KYC or AML.
* its anonymous.

1. What are some other factors that make DEX an ideal one.
2. Hodl hodl and Bisq have been reputed to be DEX, are they really dex exchanges?

Keep your comments coming as we learn together.

    

[mk4]

Most of the "DEXs" were only riding the "DEX" hype, even though obviously they aren't decentralized to start with. At best, non-custodial, but definitely not decentralized. Even CZ himself admits it:


https://twitter.com/cz_binance/status/1098917213321408512

Sure "don't call it a DEX" even if you literally named it Binance "DEX".

[Wenbing]

Most of the "DEXs" were only riding the "DEX" hype, even though obviously they aren't decentralized to start with. At best, non-custodial, but definitely not decentralized. Even CZ himself admits it:


https://twitter.com/cz_binance/status/1098917213321408512

Sure "don't call it a DEX" even if you literally named it Binance "DEX".

That's for exchanges that are quasi decentralized that claims to be fully centralised

[coupable]

The four parameters you set wouldn't determine whether it's centralised or decentralised. After years of testing different crypto apps, we know now that what we have called "decentralised exchange" is a total bullshit :
Control : If they can freeze your balance or use it while you are logging in, then you are still under control and i remember some DEXs forbid users from withdrawing for several reasons or pretending that the token wallet is under maintenance.
KYC : Search about CryptoBridge which was a well known Dex and how they suddenly started asking users to submit their KYC docs in order to continue using the app.
Universal Ban : Of course they can ban users depends on many variables. It just requires a fork from the running code to forbidden a selected IPs or logs from a specific region to use the platform. We saw this with DEXs having legal issues with some countries.
Hacking : I can't tell it's impossible but, as far as i know, it's possible as an inside job within the Dev team behind.

[o_e_l_e_o]

Search about CryptoBridge which was a well known Dex

They called themselves a DEX, but as mk4 says, they just used it a flashy marketing gimmick. There was nothing decentralized about CryptoBridge.

It just requires a fork from the running code to forbidden a selected IPs or logs from a specific region to use the platform.

Sure, but if it is truly decentralized then there is nothing they can do to stop users from said countries running the old version of the platform and trading with each other or anyone else using the old version.

Hacking : I can't tell it's impossible but, as far as i know, it's possible as an inside job within the Dev team behind.

So, a real DEX can't be hacked in the same way a centralized exchange can, because there is no central wallet, database, or servers for a hacker to attack in order to steal coins or personal data. There can, however, still be vulnerabilities in the code which can exploited.

[Febo]

2. Hodl hodl and Bisq have been reputed to be DEX, are they really dex exchanges?

I dont know of hold hold, but fro BisQ, it is totally decentralised except disputes. They do somehow have plan to fix that in the future.  There also exist DEX exchanges on some asset platforms. But they only trade tokens of those asset platforms. Like tokens of Etehreum or tokens of Counterparty.

[Stedsm]

While we are talking about DEXs, I have a question here:
What IF:

- A DEX literally gets hacked somehow with all our privkeys too getting leaked to hackers and they move all the funds (that's what the least they can do)

Another thing, a DEX doesn't really give us a much better experience compared to CEX be it in terms of trading or providing any sort of support to their users. The worst part of using it is that, we don't get that much liquidity over there and so, not enough volume is available to trade.

[mk4]

Most of the "DEXs" were only riding the "DEX" hype, even though obviously they aren't decentralized to start with. At best, non-custodial, but definitely not decentralized. Even CZ himself admits it:

https://i.imgur.com/6p1byoM.png
https://twitter.com/cz_binance/status/1098917213321408512

Sure "don't call it a DEX" even if you literally named it Binance "DEX".

That's for exchanges that are quasi decentralized that claims to be fully centralised

You mean quasi decentralized that claims to be full decentralized right? Which is pretty much like 95% of existing so-called "DEXs" that aren't actually decentralized, not even close. Binance "DEX" itself included.

[Coin_trader]

While we are talking about DEXs, I have a question here:
What IF:

- A DEX literally gets hacked somehow with all our privkeys too getting leaked to hackers and they move all the funds (that's what the least they can do)

Theoretically speaking. DEX shouldn't be hackable as per the general of it but in previous years DEX really got hack just like what happened to Ether delta that the hacker retrieve the data of customers by accessing the site DNS records and some trick on the domain. I believe that the ideal DEX will not gonna exist in reality. All DEX should be forced to be regulated or else will be force closed because we have SEC.

Source for DEX hacking: https://news.bitcoin.com/one-week-etherdelta-hack-funds-still-stolen/

[Blank-Head]

You haven't mentioned properly about what Dex really means.You just highlighted the features and advantages.But Dex exchange means where transection happens in peer to peer nodes without any third party interface and here account information are secured.Only user have access to his fund.

To know whole details about Decentralized Exchange then take a look in this thread:
Decentralized Exchanges

[jseverson]

Theoretically speaking. DEX shouldn't be hackable as per the general of it but in previous years DEX really got hack just like what happened to Ether delta that the hacker retrieve the data of customers by accessing the site DNS records and some trick on the domain.

The "hacker" was not able to get any data from any records, and it wasn't even a hack per se. It was DNS jacking, basically meaning they were able to replace the original site with a fake one, so the original itself was never really compromised. It was essentially a phishing attack; if you didn't try to log in while the fake was up, you wouldn't have been affected.

That being said, EtherDelta had centralized components, and was taken advantage of. DEX should still be more resistant to attacks than standard exchanges though, mostly thanks to the fact that they don't keep your coins for you.

While we are talking about DEXs, I have a question here:
What IF:

- A DEX literally gets hacked somehow with all our privkeys too getting leaked to hackers and they move all the funds (that's what the least they can do)

Wouldn't you be running the same kind of risk by using a CEX? We've seen CEX hackings happen far more often than DEX hackings, even.

[joniboini]

- A DEX literally gets hacked somehow with all our privkeys too getting leaked to hackers and they move all the funds (that's what the least they can do)

What kind of DEX records the private key of their users?

DEX is not a single thing, it's an idea where you can expand and decide how it works. You can literally only allow people to connect with an HW so there's no private key input. I'd look for other options, to say the least. Where in a centralized exchange it's guaranteed that you don't hold any control over your funds.

[coupable]

I remember when etherdelta [eth dex] users got their balances stucked in the exchange and they fixed the bug within two days but many users lost their deposits. After that, they lunched ForkDelta as a secure alternative.

Hacking : I can't tell it's impossible but, as far as i know, it's possible as an inside job within the Dev team behind.

So, a real DEX can't be hacked in the same way a centralized exchange can, because there is no central wallet, database, or servers for a hacker to attack in order to steal coins or personal data. There can, however, still be vulnerabilities in the code which can exploited.

And here's an example of DEX got hacked https://decrypt.co/24961/hacker-steals-250000-from-crypto-exchange-bisq

I also remember what happened to Bancor three years ago. The hack occured in a shady way which let everybody think twice before to invest in those called DEXs.

Many other examples of exchanges promoted as DEXs and once got hacked or have errors, we discover that they are not fully decentralised so they lacks transparency from the biggenning .

[o_e_l_e_o]

Many other examples of exchanges promoted as DEXs and once got hacked or have errors, we discover that they are not fully decentralised so they lacks transparency from the biggenning .

Just because Bisq was hacked, doesn't mean it isn't decentralized or wasn't transparent.

You can read how the hack happened here: https://bisq.network/statement-security-vulnerability-april-2020

The TL;DR is that there was a vulnerability in the code that allowed the attacker to redirect the escrow funds to themselves. Since the Bisq code is open source, anyone could have found this exploit, and it is unfortunate that the first person who did find it was a malicious user rather than someone who would have alerted the devs to patch it. The attacker in question did not hack a central server or central wallets, because there are none to hack. He traded peer-to-peer with other Bisq users, and used the exploit to steal funds from the people he was trading with.

It was unfortunate, yes, but nothing about it was due to centralization or a lack of transparency.

It's also worth noting that shortly after the hack, a proposal was opened, voted on, and accepted by the community to use trading fees to refund the affected individuals: https://github.com/bisq-network/proposals/issues/209

[LbtalkL]

While we are talking about DEXs, I have a question here:
What IF:

- A DEX literally gets hacked somehow with all our privkeys too getting leaked to hackers and they move all the funds (that's what the least they can do)

Theoretically speaking. DEX shouldn't be hackable as per the general of it but in previous years DEX really got hack just like what happened to Ether delta that the hacker retrieve the data of customers by accessing the site DNS records and some trick on the domain. I believe that the ideal DEX will not gonna exist in reality. All DEX should be forced to be regulated or else will be force closed because we have SEC.

Source for DEX hacking: https://news.bitcoin.com/one-week-etherdelta-hack-funds-still-stolen/

I was using this DEX before when that hacked happened, good thing my funds are safe. Yes, DEX shouldn't be hacked but I guess no matter how tight the security is, hackers will still find a way it is a matter of time. There is no truly safe here on the internet. Yes, Government regulation is always in our way, somehow it is one of the reasons that hinder crypto adaption but I guess it is for the best. Implementing KYC eliminates some bad actors, fraud, etc.

[Stedsm]

- A DEX literally gets hacked somehow with all our privkeys too getting leaked to hackers and they move all the funds (that's what the least they can do)

What kind of DEX records the private key of their users?

Well TBH, I'm not trying to play oversmart here but I've used some old DEXs and a few of them got hacked and I came to know that the ETH private keys that we used to login to our accounts, got compromised. That was one such incident which proves that some DEXs do record our privkeys entered to use them.

Where in a centralized exchange it's guaranteed that you don't hold any control over your funds.

I understand that CEX also possess the same risks (or even better or maybe less), for me it's less stress to use a CEX because even if a reputed CEX gets hacked, they'll do anything to get us our funds back or they'll pay them back through their own efforts. But DEXs rarely help in these cases as there's lack of support and they need to bridge this gap in order to provide better customer service to us.

[Lordhermes]

Many DEX Had Been Hacked Literally So OP Trying To Say That Decntralised Exchange Can't Be Hacked? I Don't Think So. Even The Number One Most Reliable Decentralized Exchange Binance Had Been Hacked Too.




https://www.bloomberg.com/news/articles/2019-05-08/crypto-exchange-giant-binance-reports-a-hack-of-7-000-bitcoin

[DdmrDdmr]

<..>

Actually, it was (centralized) Binance that was hacked to some (7000 BTCs) extent, not Binance (allegedly) DEX.

Nevertheless, the DEX term has been twisted for marketing and appeal reasons many times, and things are not always what they seem:

It turns out that DEX has it’s own kind of trendy appeal to it, and not everything under that name is really decentralized, having therefore to be careful when we use a DEX believing that we are really in control of our funds.

Binance DEX for example sounds appealing, but under the hood, as I understand it, we are in control of private keys that are not what we may think they really are:
Can Binance Chain, DEX Outmanuever Regulators & Ethereum?):

<…> However, when reading through the FAQ, we’ve flagged a few items:
1.   Binance has announced that you can trade Bitcoin and Ethereum via a pegged BEP2 token
2.   Projects have systemic risks such as composability and centralization when trusting Binance Chain as its only platform.
3.   Atomic swaps, which is required for true non-custodial trades, are not going to be implemented initially and only promised in the future
In order for a trader to trade Bitcoin on its DEX, they would have to first deposit a native Bitcoin and in return, they would receive BTC-B (a BEP2 token pegged to BTC).
<…>
Counterparty Risks of Pegged Tokens
Trading assets like Bitcoin on Binance Chain require a third-party, initially Binance itself, to hold the asset and issue pegged assets like BTC.B that can be traded on its DEX. This introduces a counterparty risk that is no different than using a centralized exchange. While the pegged asset (BTC.B) remains in the trader’s custody until a trade is executed, the original asset (BTC) is held by Binance or a third party. There is no guarantee that the pegged asset can be swapped back to the original asset other than the trader’s confidence in the brand.
<…>

That is to say, when we have BTCs on Binance DEX, what we’ve really got is a token called BTC-B, and not BTC. Holding private keys to a sweetened BTC type token is not a real deal, and you’re depending on Binance not getting screwed at some point just the same.

What’s more, they’ve recently announce that they will be geo-blocking IPs from 28 countries from July the first onwards (see Binance DEX to geo-block U.S. customers and 28 other countries starting in July).

When you add it all up, you’ve really got to ask yourself just how much DEX is really behind some of the market DEXes. 

[Wenbing]

While we are talking about DEXs, I have a question here:
What IF:

- A DEX literally gets hacked somehow with all our privkeys too getting leaked to hackers and they move all the funds (that's what the least they can do)

Theoretically speaking. DEX shouldn't be hackable as per the general of it but in previous years DEX really got hack just like what happened to Ether delta that the hacker retrieve the data of customers by accessing the site DNS records and some trick on the domain. I believe that the ideal DEX will not gonna exist in reality. All DEX should be forced to be regulated or else will be force closed because we have SEC.

Source for DEX hacking: https://news.bitcoin.com/one-week-etherdelta-hack-funds-still-stolen/

Does your answer suggests that there can't be a perfect decentralized crypto system?
Are you also saying that in the coming days, the government will regulate bitcoin and close it down if there is refusal?

[gentlemand]

I wouldn't class any dex that ran on a website as properly decentralised. That means a centralised domain name and hosting. That can be hijacked and the operator can be feeding you false information.

I'd say Bisq comes closest at present. Ideally you want something that's part of an official client's code that talks directly to the other wallet you're trading with. The more eyes on it the better.