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Why Are Decentralized Exchanges So Important & How Users Can Use Them?

Web3Sonic· 4 min read

Most people in the world today must be familiar with cryptocurrencies. In addition to the existence of a new instrument for digital financial transactions, there are a number of other factors that make people interested in cryptocurrencies. However, people would require a cryptocurrency exchange for trading with cryptocurrencies.

Interested in buying or selling Crypto?

Once you’ve decided you want to trade some Bitcoin, Ethereum, or another cryptocurrency, you’ll need to create an account on a crypto trading platform to exchange your U.S. dollars/ Rupee (or other currency) for digital assets.

So, if you are someone who wants to invest & hold crypto or has a business that deals with crypto financial transactions, read further to know the full picture!

What are Crypto Exchanges?

Cryptocurrency exchanges are the platforms that facilitate the trading of cryptocurrencies for other crypto assets and NFTs.

And here, we have two types of platforms - Centralized Cryptocurrency Exchanges (CEX) and Decentralized Cryptocurrency Exchanges (DEX).

Centralized Cryptocurrency Exchanges (CEX)

Centralized cryptocurrency exchanges act as an intermediary between users -both -buyer and seller and make money through commissions and transaction fees. You can imagine a CEX to be like a stock exchange but for digital assets.

But, the market has witnessed increasing risks with CEXs managing the crypto exchanges, including:

Large exchanges hold dollars worth of crypto, making them a target for hackers and theft.

Centralized exchanges often charge high transaction fees for services.

Most CEXs will hold the user’s i.e. your digital asset, as a custodian in their digital wallets rather than allowing you to store your private keys on your digital wallet. And this can cause fraud!

With the above disadvantages of CEX coming into the light, users need Decentralized Exchange platforms for fair trade!

Decentralized Cryptocurrency Exchanges (DEX)

A decentralized exchange is another type of exchange that allows peer-to-peer transactions directly from the user’s digital wallet without going through an intermediary.

Examples of DEXs include PancakeSwap, Uniswap, dYdX, and Kyber.

Decentralized exchanges work by using smart contracts (self-executing pieces of code on a blockchain)- to fulfill orders placed by end users/traders, allowing users to trade directly with each other.

This allows for more privacy and less slippage (transaction costs) than a centralized cryptocurrency exchange.

Now that you have understood the basics of cryptocurrency exchanges, even if CEXs are regulated, with recent market fluctuations, CEXs are struggling to survive. However, DEXs are the ones that people are turning to! What do DEXs offer to users? Let’s find out.

Why are Decentralized Cryptocurrency Exchanges so Important to Users?

Users or people who are actively trading want an alternative to secure transactions. That is the reason DEXs are becoming increasingly popular! Plus, DEXs have these outstanding benefits:

Users have total custody of their assets

Protects users from fake trading

Offers you the complete privacy

Want to be a part of DEX as a user? Look at how easy it is.

How can Users Operate on Decentralized Exchanges?

To become a user, you just need to get to a DEX through the use of a dApp (Decentralized Application) by a web browser. A DEX usually has a URL where you can directly access your crypto wallet. After connecting to it, a user can start interacting with the dApp & can start trading via the exchange.

Users can perform a variety of operations with digital funds:

Lending and borrowing

Exchanging

Trading

Earning interest

Insuring

The best part??!

There is no need to create a separate profile or provide KYC-background information as you would typically have to do when opening a bank account or traditional centralized exchange account.

Final Thoughts

Users need to research good Decentralized Exchange platforms to perform digital trade smoothly & with trust that they can hold the cryptos in this ecosystem in a secure way.

But, there is also the need for businesses that deal with digital trade & crypto to have a good & secure Decentralized Exchange platform for their users’ satisfaction.

# DEX

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