The Power and Potential of Decentralized Exchanges

TL:DR; Decentralized exchanges at scale represent one of the new innovative ‘game changers’ enabled by blockchain technology.

Going back a long way throughout history, all we have ever had are centralized marketplaces. Villages and towns had “market days” where people would gather in one place to trade and do business.

As economies have scaled up, our marketplaces have increased in speed and technological sophistication, but for the most part, they are still centralized.

Even eBay or Craigslist which enable a form of peer-to-peer commerce are not decentralized. They either take a fee, hold some of your assets (in the form of data, at a minimum), or add some degree of risk (they can track where you are, what you are doing which makes you vulnerable to both governments and bad actors).

What’s more, they can censor you. If Craigslist or eBay wants to ban you, they can. Nasdaq can ban Fidelity as well. Remember, your stocks are not really under your control and neither is your cash.

For most people, most of the time, this isn’t a huge problem, but it’s there and you don’t want it to happen to you.

From an economic perspective, every fee you pay to a middleman is a small drain on the economy.

We don’t even think about it too often because it is such a common way of doing business, but that “common” way of doing business is going to change.

Decentralized marketplaces bring with them lower fees and, eventually, more liquidity. You’ll be able to get more of what you want/need faster because the costs of trading items is going to decrease. When costs go down, more people participate.

This came to the fore recently because of the news that the guys at Radar Relay had closed their Series A round for $10 million dollars. I’m super excited for them and have continually been impressed every time I spoke with their CEO, Alan Curtis.

Their mission of bringing everyone on board to the token economy speaks to me. As crypto securities, currencies, utilities, and collectibles become more common, you’re going to want a way to quickly, safely, and cheaply move them around to anywhere in the world.

DEXes as they are known are going to do it.

Radar Relay is already serving people in 150 countries. The idea that you can take a digital asset (say a music file or an image) that you own and trade it/sell it to someone else without any middlemen pretty much anywhere in the world for near zero fees is pretty damn revolutionary.

And it’s not just digital assets (though that is easier), if you want to see a decentralized marketplace that covers digital AND physical assets in action, go download OpenBazaar.

Once you set up a store, NO ONE can take it down. No one sees what you are buying or selling (except the person on the other side of the deal, unless you choose a moderator) and payment is never controlled by another party.

If you just want to buy something, it’s a great experience. I’ve bought a number of things including earrings for my wife from India, which she loves…all with cryptocurrency.

I’m excited about what DEXes can do to unlock value by lowering the costs and risks of trade and thereby increasing liquidity.

For a good read, check out 4 reasons decentralized exchanges are inevitable.