what is decentralized
change
introduction
Since the early days of bitcoin, exchanges have played a vital role in matching cryptocurrency buyers and sellers. If these forums do not attract a global user base, we will have low cash flow and no way to accept the true value of assets.
Traditionally, this sector has been dominated by centralized actors. However, with the rapid development of available technologies, the number of tools for decentralized products has increased.
In this article, we will delve into those trading areas and decentralized transactions (DEXs) that do not require intermediaries.
Definition of
decentralized exchanges
In theory, any peer-to-peer exchange could generate decentralized trading (for example, atomic exchange explained). But in this article, we are primarily interested in a platform that demonstrates the functions of a centralized exchange. The main difference is that they already have a blockchain in their backend. No one takes care of your finances and you don't have to rely on transactions just like centralized offers.
How does a centralized
exchange work
In your regular centralized transactions, you deposit your money - via fiat (via wire transfer or credit/debit cards) or cryptocurrencies. When you deposit crypto, you lose control over it. Not from an application point of view, as you can still trade or withdraw it, but from a technical point of view: you cannot use it in the blockchain.
You do not have a personal key to the funds, which means that when you make a withdrawal, you ask the exchange to sign a transaction on your behalf. When you trade, the transactions do not happen in a chain. Instead, the exchange assigns balances to users on its own database.
The overall workflow is incredibly streamlined as slow blockchains do not interfere with business and everything happens in a single organizational setting. Buying and selling cryptocurrency is easier, and you have more tools.
It will be paid independently: you have to trust your money transfer. As a result, you run the risk of the opposite. What to do if the team runs away with your hard BTC? What if a hacker shuts down the computer and runs out of funds?
For many users, this is an acceptable risk. They only stick with reputable exchanges with solid records and guards that minimize data breaches.
How decentralized
exchange works
DEXs are similar to their centralized counterparts in some ways, but differ greatly in others. Please note that there are several types of decentralized transactions for users. The common theme between them is that orders are executed in a chain (as with smart contracts) and users never sacrifice the security of their funds.
There is some work done on cross-chain DEXs, but the most popular are those that revolve around assets within a blockchain (such as the Ethereum or Binance chain).
books in order
In some decentralized exchanges, everything is done in a chain (let's talk about the hybrid approach in a moment). Each order (as well as changes and cancellations) is written to the blockchain. This is a very transparent method as you do not trust third parties to send you orders and there is no way to hide them.
Unfortunately, it's also less practical. Since every node in the network is always saving orders, you will pay a fee. You have to wait for a miner to add your message to the blockchain, which means the experience will be huge.
Some recognize pre-surgery as a drawback of this model. A lead run in the markets occurs when an insider sees an outstanding item and uses that information to complete an item before processing it. So the protagonist benefits from information that is not generally known. In general, this is against the law.
Of course, if everything is published in a global ledger, it is unlikely to be exposed in the traditional sense. Another type of attack can be used: in which a miner looks at the order before confirming it and confirms that it is included in his own order blockchain first.
Examples of chain order book models include Dex Stellar and FitShare.
off-chain order books
DEX pin-chain backlinks are still decentralized in some ways, but more centralized than the previous entry. Instead of posting each order on the blockchain, where they are delivered.
or depends. You can have one centralized company solely responsible for the order book. If this company is malicious, it may gamble on the markets to some degree (ie, by filling orders or distorting orders). However, you will still benefit from non-private storage.
The 0x protocol for ERC-20 and other tokens used in the Ethereum blockchain are a prime example. Rather than acting as a single DEX, it provides a framework for parties called "relays" to manage chain book orders. Using Smart 0X Deals and a few other tools, hosts can tap integrated cash flow and relay orders between users. Transactions will not be done on the chain unless the parties agree.
These methods are ideal for user-friendly ones who rely on chain order books. They do not face the same constraints in terms of speed as they do not make much use of the blockchain. However, the commodity has to be modified here, so the off-chain order book model still falls short of centralized trading in terms of speed.
Off-chain order book processing includes FinanceTex, IDX and Ethertelta.
Automated Market Maker
(AMM)
Tired of reading the words "backlog"? Ideal, because the Automated Market Maker (AMM) template destroys this idea completely. It doesn't require makers or takers, users, game theory, and a little magic.
The specifications of AMMs depend on the implementation - they usually come in the form of a bunch of smart deals and smart offers to ensure user participation. We won't describe these processes in detail, but let's look at what UNISWAP is and how it works. For example how Uniswap Tex works.
The DEX-based AMX available today are highly user-friendly to integrate with wallets such as MetaMask or Trust Wallet. However, like other forms of DEX, a chain transaction is required to streamline the transaction.
Programs working on this front include the aforementioned UNISWAP and Khyber Network (which runs the Bancor protocol), both of which accelerate trading of ERC-20 tokens.
Advantages of DEX
1. No KYC – Compatibility with KYC/AML (Know Your Customer and Anti-Money Laundering) is standard in many transactions. For regulatory reasons, individuals are often required to present identity documents and proof of address.
It is a privacy issue for some and an accessible issue for others. What if you don't have the right documents? What if the information is disclosed in some way? Since the DEX is not identified, no one can prove your identity. All you need is a cryptocurrency wallet.
However, there are some legal requirements when the DEX is administered by a somewhat central authority. In some cases, if the command book is centered, the host must be obedient.
2. No Risk – The main attraction of decentralized cryptocurrency exchanges is that they do not hold client funds. So, too, malicious breaches like Mt 2014. Cox Hack does not put user finances at risk or disclose sensitive personal information.
3. Unlisted Tokens – Tokens that are not listed on a centralized exchange can still be exchanged for free with DEXs with both supply and demand.
Weaknesses of the DEX
1. Availability - To be honest, DEX is not as easy to use as traditional exchanges. Centralized sites offer seamless real-time transactions by blocking time. For beginners unfamiliar with non-custodial cryptocurrency wallets, CEX offers a very forgiving experience. If you forget your password, you can reset it. However, if you lose your seed penalty, your funds will not accept what was lost in cyberspace.
2. Trading Size and Cash Flow – The amount exchanged in CEX is always higher than in DEX. Perhaps most importantly, CEX also has high cash flow. Cash flow is a measure of how easily you can buy or sell an asset at a fair price. In a liquid market, there is no price difference between offers and demands, which means that there is strong competition between buyers and sellers. In a volatile market, you will have a hard time finding someone who wants to exchange assets for a fair value.
DEXs are still relatively relevant, so there is always either supply or demand for the crypto assets you want to transfer. You may not be able to find the trading pairs you want to use, and if you do, the assets may not be exchanged at a fair value.
3. Fees – Fees on DEXs are not always high, but especially when you are in a network jam or you use a chain order book.
Conclusion
Several decentralized exchanges have emerged over the years, each reiterating previous efforts to streamline the user experience and create more powerful trading platforms. Ultimately, this idea appears to be strongly tied to the ethic of self-sovereignty: like cryptocurrencies, users do not need to trust third parties.
With the development of DeFi, Ethereum-based DEXs have seen a huge increase in their usage. If the momentum continues, the industry as a whole could see an increase in technological innovations. How to get free bitcoins in 2021 without investment
As bitcoin sets new price records every day, with its price currently below ₹40,000 (May 2021), the question of how to earn bitcoin is more relevant than ever.
Naturally, the free ways to show bitcoins below will not make you much money. However, if you have some free time and wish to earn some bitcoins, these methods may be suitable for you.
Recovered $10,000 coins are now 4 times more expensive (6 times more expensive because of the seasonal eruption caused by Elon Musk's tweet)
