DEX: The solution through decentralized exchange in a secure way
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A decentralized exchange (DEX) is a digital asset exchange platform that works on the principle of decentralization, that is, without the involvement of a central authority. A decentralized exchange development allows peer-to-peer trading of digital assets, that is, directly between investors . Therefore, users do not have to transfer their assets to the exchange, which reduces the risk of possible theft or hacking of the exchange's servers. The decentralization of operations also prevents possible price manipulation or fraudulent operations.
Decentralized exchanges are much more advanced than centralized ones . Among other things, they provide better privacy protection, but they are still not as popular as they deserve. Decentralization is the key to the development of cryptocurrencies, and operations based on Blockchain technology . Centralized exchanges are only seemingly safe. The most used exchanges will always contain some security vulnerabilities present in all centralized systems, since it is impossible to exclude them without eliminating the human factor.
With DEX you can get a much safer and above all individualized way of carrying out cryptocurrency transactions . Decentralization has the potential to remove the potential drawbacks of the cryptocurrency economy and thereby widen the circle of users and increase the number of applications. Without a doubt, it is an innovative model to carry out cryptocurrency exchanges. This model is constantly being perfected, which is why new decentralized cryptocurrency exchanges have been and are being created.
What is DEX?
A decentralized exchange DEX, (decentralized exchange) is an exchange that works on the basis of a distributed ledger. It does not store users' funds or personal data on its servers and acts solely as a platform to match users' offers to buy or sell assets. Trading on these platforms is done directly between the participants (peer-to-peer) without financial intermediaries . In other words, a DEX is a virtual space dedicated to carrying out commercial transactions on digital assets.
In the world of cryptocurrencies there is a paradox. Cryptocurrencies are decentralized , as there is no central authority or government that controls their issuance. However, their decentralization ends when they are exchanged for other cryptocurrencies or for fiat money. Most of the time, these trades take place on centralized exchanges or exchanges. That is, there are centralized servers and one or more owners who can freely dispose of this exchange. This significantly increases the risk of them interfering with users' transactions.
The objective of DEX extchange development is to eliminate intermediaries and create a single point of failure by carrying out transactions directly between users, on the very chain of blocks that supports the platform, bypassing the trading platform. In this way, DEXs provide buyers of an asset with the infrastructure to find sellers and vice versa. The main advantage of DEX over CEX is obvious: reliability, an intermediary is no longer necessary. Users are responsible for their own funds, not a centralized platform.
How did this technology originate?
The DEX decentralized cryptocurrency exchange meant the decentralization of the four basic elements of trading: capital deposits, token swaps, streaming orders, and order matching. The first decentralized exchange was Blocknet, which, recognizing the importance of full decentralization, decided to launch a second-layer blockchain interoperability protocol . This protocol provided the foundation for truly decentralized trading, applying the original principles of Bitcoin.
In other words, DEXs enabled the decentralized exchange development of assets, inter-blockchain communication, and the monetization of services. All this while maintaining openness, transparency, integrity and a high level of decentralization . Blocknet has evolved with the needs of society . The utility of a decentralized cryptocurrency exchange forced manufacturers to launch a tool adapted to smartphones. The first dApp built on top of the Blocknet protocol -Block DX- was extremely popular and started another trend in application programming.
On which platforms is DEX most used?
The use of DEX has grown significantly with the development of decentralized finance. If the trend continues, we are likely to see more and more technological innovations across the industry . In May 2020, Ethereum fully demonstrated its usefulness in the market as a decentralized, zero-trust, and censorship-resistant platform for the execution of smart contracts and thus as the basis for decentralized applications (DAPP). The success of Ethereum is proven and it is one of the platforms that uses DEX the most.
But not only Ethereum is one of the platforms where DEX are widely used. Here are some of the most used decentralized exchanges where you can make your crypto investments:
Pancakeswap – This is the most popular DEX on Binance Smart Chain with the ability to earn CAKE
uniswap clone– This decentralized exchange runs on the Ethereum blockchain and enables automated transactions through smart contracts.
Sushiswap – An experimental clone of Uniswap clone script that introduced the SUSHI token.
How is it different from previous platforms?
Centralized exchanges are run by a specific company or person that is for profit . The management of exchanges is responsible for protecting user data and information about trading, fully controlling the operation of the platform and independently making decisions that are important for the development of the project. Unlike decentralized exchanges that are managed automatically or semi-automatically with the participation of platform participants in the process of making important decisions.
DEX platforms provide the technical possibility of direct interaction between participants and use a distributed ledger (blockchain) to store and process data. In other words, centralized exchanges are run by specific individuals to make money from this activity . They are responsible for all decisions on company policy as well as functional content. Decentralized exchanges are governed and accept all changes by a general vote of the participants on the trading floor.