A decentralized or decentralized system is the main purpose of creating Bitcoin or other cryptocurrencies as peer-to-peer payments without involving intermediaries or third parties.
However, Bitcoin users are mistaken. Many of them rely on Bitcoin payment transactions on third-party services such as cryptocurrency exchanges whose numbers are increasing.
By relying on third parties, this means that the exchange is centralized or centralized. The presence of these exchanges is clearly incompatible with the principle of cryptocurrency as a decentralized currency.
Exchange services can indeed make transactions easier, including Bitcoin storage and trading. But they are not without risks, the main thing that often happens is hacking of exchange security.
The value of losses from the loss of digital assets due to hacking is not insignificant. For that, we need an exchange to exchange currency for crypto or vice versa without risk.
The presence of a decentralized exchange can be a risk-free cryptocurrency trading solution. So what is meant by a decentralized exchange?
Definition of a Decentralized Exchange
Decentralized Exchange (DEX) is a cryptocurrency storage, transfer, exchange, and trading service exchange without the involvement of third parties. The trading process is carried out directly between users (peer-to-peer) automatically.
The systems on the exchange are made possible by creating a proxy token (a crypto asset that represents a specific currency) or through a decentralized multi-signature Escrow system.
DEX destroys the still centralized exchange ecosystem, eliminates the role of intermediaries, and allows direct free trade between parties. This exchange fits the principles and objectives of the decentralized system.
Benefits of DEX
There are a number of benefits to using a decentralized exchange. The first is that it is independent, so you don't have to worry about the security system of the exchange.
Because there is no third party involved, the funds in the decentralized exchange will be stored in your own wallet, not in any exchange provided wallet.
The next benefit of a decentralized exchange is privacy. You don't need to provide personal details to anyone. Personal identity only needs to be shared with users who transact with you. However, data needs to be disclosed if the exchange involves bank transfers.
A decentralized exchange will not run the risk of server downtime as the hosting is distributed through nodes. The DEX system is also very difficult to hack because it is all over the computer network.