Centralized Exchanges : What It Entails #005

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Hello great minds,

It is a wonderful opportunity to come before you all today to discuss on an issue of great importance.

I trust you are all doing perfectly well and are enjoying your activities in the community today as you join hands with other members to promote steemit on twitter and other various social media platforms.

We learnt in our past discussion some challenges that are involved with the use of centralized exchange but we were unable to explain all.

Today, we shall be continuing our explanation from where we stopped, please stay tuned.

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DIS-ADVANTAGES OF CENTRALIZED EXCHANGE

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There are some dis-advantages of making use of a centralized exchange and some of them are

• COUNTERPARTY RISKS:

Counterparty risk is one of the dis-advantages of making use of a centralized exchange.

Here, users will have to trust the security of their token in the hands of a third party, and this is usually done by allowing the exchange handle your financial transactions.

A centralized exchange is often with the highest authority over a user's funds and this is because it has in its custody the private keys to a user's account.

Private keys are keys with the highest authority in an account as it is being used to authorize the sending out of cash from a user's account.

This counterparty becomes risky because if the data of the centralize exchange gets breached, it's users will bare the consequences.

• LIMITED ASSET SELECTION:

Another dis-advantage of a centralized exchange is that it does not cover a large number of assets.

It only makes available a limited number of assets and this makes users loose interest in it.

It indeed is a dis-advantage if it does not contain some major cryptocurrency assets.

When compared to DEX, it possesses very little asset range.

• REGULATORY CONSIDERATIONS:

Another dis-advantage of a centralized exchange is that it's operation is solely dependent on the instructions of regulatory bodies.

There are so many instructions to be followed that if not followed, could lead to the loss of a users funds.

Unlike the dex where users are free to act at their will and bear whatever consequences that results from it.

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CONCLUSION

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We have examined some other challenges associated with the use of centralized exchanges.

When making use of a centralized exchanges, you should be aware of it's advantages and it's dis-advantages.