Cryptocurrencies are rapidly growing in popularity, and society at large appears to be following suit.
Every year, the amount of people interested in it grows, which necessitates the need for crypto exchanges!
In fact, cryptocurrency exchanges perform a significant role in the spread of the blockchain industry.
Cryptocurrency Exchanges are places where investors may purchase, sell, and trade their assets easily, there must be enough currencies allowed by an exchange to ensure its long-term viability.
Most people utilize it to look for cryptocurrencies that promise huge returns. It’s also important to note that they choose exchanges that offer high-quality services.
Datalight, a crypto research site, reported that the United States has experienced the highest number of visitors leading to 100 exchanges in the past year.
In light of the recent spike in interest in crypto exchanges, we have seen a lot of exchanges come into existence, we have just two types of exchanges as far as the crypto space is concerned, they are:
1. Centralized Exchange (CEX)
2. Decentralized Exchange (DEX)
Centralized exchanges function in much the same way as our normal bank.
The following are its characteristics:
- It is owned by someone
- It is safe to some extent.
- They strictly adhere to established procedures and guidelines.
We’ve seen a growth in the number of people using decentralized exchanges. In truth, the battle over-regulated markets have indeed commenced! What does that entail?
In the blockchain industry, Trace Mayer presented the “proof of keys” notion.
According to him, It’s time for owners of bitcoin who have kept their currency on exchanges to move it to their own private wallets. As we all know, putting digital assets in the hands of a third party raises worries about their safety.
The dangers of employing a central exchange must also be considered:
- They are vulnerable to hacking, and as a result, money could be stolen.
- Investors’ funds will be wiped out if centralized exchanges are compromised.
- The exchange can disappear at any time.
Decentralized exchanges have been a blessing for those who want to keep their assets in their own hands and avoid the pitfalls of a centralized exchange.
The following are some of the reasons why it’s considered to be preferable:
- Privacy has been greatly increased as a result of the lack of registration or KYC requirements.
- Deposits and withdrawals are not necessary.
- Transactions amongst participants are mediated through smart contracts.
- Regulators are not needed because failure is extremely rare.
In the past, decentralized exchanges had problems with people losing money due to a few mistakes.
Individuals can use decentralized exchanges to manage their cryptocurrency assets. In decentralized exchanges, there is no intermediary.
Many of the drawbacks of centralized exchanges can be avoided since decentralized exchanges operate without a central body. Instead of using a centralized exchange to send crypto to other users, individuals can now send their crypto freely to other users, rather than just using their wallets on the central exchange.
We need to know more about what makes decentralized exchanges possible.
There are decentralized exchanges where digital assets can be traded without the need for a third party to verify transactions. Rather, smart contracts are used to promote trading services.
DEXs use a non-custodial structure when there are no middlemen. You are responsible for protecting your private keys and wallets.
A private key is a significant benefit if you care about your privacy. If your keys are misplaced, no one else will be able to access your wallet.
What is the purpose of a Decentralized Exchange?
Using DEXs is a better option because of the following:
Crypto traders pay attention to trading fees a lot. DEXs often bid a percentage of the charges for every transaction, whereas centralized exchanges typically charge for each trade!
Immediately a transaction is executed on a DEX, a fee is expected to be paid to verify the transaction on the blockchain. These changes are actually between $0.05 and $1.
There is usually no single authority engaged in decentralized exchange scripts. As a result, they will not be subjected to any additional obligations. Anyone can open an account and begin trading without verifying their identity.
Anonymity also allows people to gain access to instruments that would be inaccessible in centralized exchanges.
If you don’t get it, here’s an example. If a US citizen is being denied access to a particular centralized exchange, Ravendex, a decentralized exchange can offer him the same services without any hindrance from the government.
Owning one’s assets is another feature common to all DEXs. All coins held by a centralized exchange are owned by the exchange. It is possible, however, that faster execution can be achieved by hanging onto the exchange of the keys. However, this could be the cause of the stealing of digital assets!
This is something you’ve seen in action. Most of the stolen money in 2018 came from a cyberattack on the Coincheck exchange, which took $713 million. You really shouldn’t ever worry about these issues in a DEX!
Liquidity is important in the discovery of price, and that’s why centralized exchanges are disappearing gradually. COO of Zeus Exchange, Catherine Yushina, emphasized its importance in the buying and selling of cryptocurrency.
Liquidity in the cryptocurrency market can be created by linking the crypto and local currency markets. “More capital means faster transactions, more stable prices, and new players in the market. Bitcoin and blockchain technology will become more widely used by the general population which will allow the market to mature. “Cryptocurrency is like an offshoot of the finance industry in its entirety, rather than a substitute for fiat currency.”
Ravendex is a Cardano-based crypto project that aims to create a decentralized exchange.
Its purpose is to provide a platform that has incredibly minimal fees and allows for quick cross-border transactions.
More importantly, it aspires to include features that will be useful to Cardano supporters. Also, we also look forward to creating a community of active investors who may vote on issues. They can also lend coins or provide liquidity to create a fully functional decentralized exchange.