Centralized Exchanges : What It Entails #004

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Hello great minds,

It is a great opportunity to come before you all today to discuss on an issue if great importance in the cryptospace.

I trust you are all doing excellently well and are enjoying your activities in this great community.

In one of our discussions, we learnt about centralized exchanges, we discuss specifically on the advantages of a centralized exchange.

Today, we shall be discussing on some of the dis-advantages associated with the use of centralized exchanges, please stay tuned.

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DIS-ADVANTAGES OF CENTRALIZED EXCHANGE

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As there are advantages of a centralized exchanges, there also posses some dis-advantages of centralized exchange and we shall be examining some of them below.

• CENTRALIZATION OF CONTROL:

One dis-advantage of using a centralize exchange is that it is solely dependent on a central authority.

This means that its activities is being dictated by a central unit, the private keys of users is being held by the central authority and this can pose some security issue.

When the keys is held by a central authority, it is obviously been stored online and it is vulnerable to hackers, and this can lead to loss of sensitive information.

• PRIVACY CONCERNS:

Privacy concerns is another issue associated with the use of centralized exchange.

Before you can make use of a centralized exchange, you will be required to provide some sensitive information about yourself and this might infringe on your privacy.

When you provide this data and the system gets breached, you stand a very high risk of loosing your sensitive information and this will be very detrimental to your financial health.

• SECURITY RISK:

Another dis-advantage of a centralized exchange is that it is subject to online risks.

It has a higher probability of being hacked than a decentralized exchange.

In the past, there have been cases of when a prominent centralize exchange got hacked and this led to very disastrous consequences.

Considering the facts that the private keys of users are being stored online, this keys are being used to send user's funds out of an account.

And when this system is hacked, the private keys fall into the wrong hands and impose a great risk on user's funds

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CONCLUSION

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There are still other minor dis-advantages associated with the use of centralization and there are advantages of using centralized exchanges too.

Please stay tuned and watch out for our next discussion