The Role of Decentralized Exchanges (DEXs) in the Crypto Ecosystem

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For many years, we have been seeing Decentralised exchange becoming a major foundation on which the crypto ecosystem actually thrives and succeed. In fact with the Decentralised exchange, we now have a peer to peer system that encourages massive trading of the various digital assets out there and this happens without not depending on any middlemen. Decentralised exchange makes use of the Blockchain technology to help make use of the attributes that the Blockchain technology have to thrive.

Blockchain attributes like the transparency, security and even the Decentralised nature also as it helps to create a massive difference between the centralised exchange from the Decentralised exchange and this has always go a long way to actually transform the crypto market from what we know it to be years ago to what it is right now.

Let me briefly start by establishing valid points from us understanding Decentralised exchanges. When we talk about Decentralised exchange called the DEX means a system or a platform that encourages cryptocurrency trading most especially between traders and users. This makes it so different from the centralised exchange we have always been used to. When it comes to centralised exchange, it is always limited to intermediaries or middlemen rather.

We have a whole lot of DEXs as examples like the Uniswap, Pancakeswap and many more. Of course some of those I make mention of make use of either the Ethereum network or the Binance smart chain rather. DEXs makes use of users to actually be able to trade tokens and even with trading those tokens still give them the maximum control also over it. This goes a long way to help reduce risk or any issues associated to theft.

Let me briefly talk about a lot of advantages of Decentralised exchanges. Of course some people still prefer the centralised exchange as compared to the other and that is due to some reason also. The first advantage of the centralised exchange is it helps to actually enhance security because it helps to remove middlemen or let me say internediaries, by doing so it helps to remove attack from hackers and helps to reduce the rate at which those exchanges are hacked.

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The second one is the aspect of anonymity and privacy. Decentralised exchange helps to improve the privacy of some vital informations and examples like the KYC which is called the know your customer because it helps to create a system whereby users can trade their crypto and even doing that without them not showing their identities at the same time. This helps to promote privacy among individuals.

And lastly is it helps to give access to a more broader usage of the tokens as it was. It makes use of what I called the Decentralised governance also which helps to make it easy for new tokens to be issued and not only issued but also systems whereby token holders can vote on decisions concerning the network.

Even with the lot of advantages that Decentralised exchange faced, I will say there are still challenges that is attached to it which is facing Decentralisation exchanges as it were. The first is the fact that it have a very complex user experience which many of us are not always aware of. For novice who just enter the crypto world, sometimes it can really be quite difficult to actually try to navigate and explore the DEX as it were.

The second one is the issue of Scalability issues. What do I mean by that? Most of the time on the Blockchain system, there is always high volume of transactions that is to be carried out and which sometimes can actually lead to high congestion and even a very increased fee that sometimes can lead to high demand which can lead to some transactions to be affected.

The other challenge is the aspect of regulation. There is no regulation oversight for DEXs which sometimes is a very big concern and which sometimes lead to what we call money laundering and the truth is if it is not dealt with, it can lead to more illicit activities to actually be carried out. Well that has really improved as recently the government has been regulating some of the Decentralisation platforms which is a very positive signal ahead.

As I conclude and trying to compare both the centralised exchange and the Decentralised exchange, I will say it still point out to preferences. Both of them have their own advantages and disadvantages and at the end of the day, it is what you do that actually determines the outcome of it also. I personally I will still go for centralised exchange much more than Decentralised exchange.