Centralized VS Decentralized exchanges - TWINS (win.win)
TWINS by New Capital will be revolutionizing decentralization by innovating a completely decentralized exchange platform and proof-of-stake blockchain ecosystem enriched with cross-chain atomic-swaps capabilities to facilitate the direct transfer of funds between the network users. There will be no cost or fees for the direct peer-to-peer exchanges, as these transactions are performed directly between user wallets.
While we hold on to our excitement, its vital to go over the difference between Centralized and Decentralized exchanges and how TWINS can add a value here -
A centralized exchange is a professional entity that provides users with a trading platform, while monitoring trades, checking the order books and making sure they are compliant with local regulations. Dealing with a centralized exchange you will have interactions with a third party, which in many cases is the company running the exchange.
Some examples of centralized exchanges are: Huobi Pro, Binance, GDAX, Kucoin and OKEx. TWINS Dex will help users to avoid the risks of centralized exchanges and make sure that a third party is no necessarily required.
Centralized exchanges and why are they used
Despite the blockchain and cryptocurrency industry main focus on decentralization, there are advantages to centralized exchanges, namely:
When analyzing the trading volume on digital asset exchanges, you immediately notice the absence of decentralized exchanges on the list of highest ranking exchanges. Without good liquidity an exchange cannot function properly as the discrepancy between buys and sells needs to be limited. Centralized exchanges tend to have a better liquidity rate, making top rated exchanges ideal platforms to execute high-quantity trades.
Because of the extensive development resources after the initial funding and the high daily earnings, centralized exchanges have the capital to develop and update their trading platform to adapt to their customer's needs, making it easier to use.
In light of recent regulatory upgrades, centralized exchanges have to adapt to government regulations. Most centralized exchanges have recently updated their terms and the majority that hasn't, is already implementing know-your-customer (KYC) and anti-money-laundering (AML) user requirements.
Centralized exchange trades can usually be executed in a fraction of a second, because of the internal optimized trading system. Margin trading and stop-loss functions can be added in contrary to decentralized exchanges that cannot implement these trading features at the moment.
In summary: centralized exchanges tend to provide a better market liquidity, have an easy to use platform, are regulatory compliant and enable fast transactions.
Need of Decentralized exchanges like TWINS protocol
A decentralized exchange is a peer-to-peer, open sourced, automated digital asset trading platform. It does not rely on a third party to intervein or execute transaction orders. Transactions on a DEX are executed peer to peer, which complies with the original intent of the creator(s) and developers of Bitcoin and blockchain technology to aim for decentralization and form autonomous organizations. Trading at a decentralized exchange allows you to preserve ownership of your tokens as you remain in the possession of your private keys. Atomic swaps is another important aspect of decentralization and TWINS plan to provide its users a high quality Dex environment.
Decentralized exchanges tend to focus on supporting a specific blockchain protocol, for instance IDEX and Etherdelta focus on Ethereum ERC-20 tokens, while Switcheo and in the near future NEX, will focus on Neo NEP-5 standard tokens. The Waves platform has its own decentralized exchange (DEX) where you can trade tokens based on the WAVES Network.
Advantages of Decentralized exchanges like TWINS protocol -
One of the best features of using a decentralized exchange like TWINS is the fact that it is trustless. You do not need to trust a third party to use it. Cutting out the middleman will also lower the transaction costs as staff expenses typically would take up a large portion of the total business expenses.
A transaction on a DEX can be pretty anonymous and transparent. Transparency is yet another advantage of the blockchain or 'distributed ledger' technology. You can check and browse transactions on the blockchain, but you cannot find the owner based on the transaction hashes.
Trades are executed peer-to-peer and the exchange relies fully on its users. Another benefit is no transaction fees and hence TWINS very proudly offers a seamless user experience with essential security guarantee as the trading on TWINS DEX is trustless, pretty secure, anonymous, transparent and its run by the users.
Disadvantages of Centralized Exchanges -
Centralized exchanges are often criticized for their high listing fees. Some of the centralized exchanges have faced security breaches, allowing hackers to steal a substantial amount of money. Being regulatory compliant can be seen as a disadvantage as well. Users that want permission to trade on the exchange need to verify their identity by submitting their identification papers. Complying makes users vulnerable to identity breaches as you need to trust the person handling your verification to be of good faith.
There are some question marks at the current state of decentralized exchanges. Questions that occasionally pop up are: How decentralized are they? What will happen if they get hacked? Who can stop a malicious actor from scamming or hacking users? In the case of massive real-world adoption, how can a DEX function with having scalability issues? How to trade a token without proper liquidity?
Security is still a major issue in the exchange market. CipherTrace, a security firm, recently announced a total amount of 731,000,000 USD worth of cryptocurrency has been stolen in the first half of 2018, due to security breaches and hacks. Centralized exchanges Bithumb, Coinrail and Cointrack were some of the companies that fell victim to hackers.
Not only centralized exchanges have been the target of attackers. Etherdelta had a security breach late last year and just recently Bancor Network had a malicious actor attack the network, which resulted in the theft of 13,500,000 USD worth of tokens. The total amount of the heist was actually much higher, but Bancor managed to regain control of 10,000,000 USD worth of tokens by freezing them.
The safest way to trade on a decentralized exchange is by connecting your hardware wallet. Some of the decentralized exchanges, like Idex and Etherdelta have Ledger or Trezor support integrated into their platform. This way you do not sign over control of your private key and a hacker cannot steal it. You can also use a Google Chrome add-on extension like Metamask to trade safer. You will need to check to be sure you have the official version of Metamask downloaded from the Google Chrome web store.
Also, there is an additional headache of KYC compliance and identity document submission that one has to do while using such centralized services. And this opens you to another vulnerability of identity theft or your personal identity information getting leaked via centralized exchanges.
Not just this, nowadays popular centralized exchanges are not listing most of the ICOs or token sales because of the increased regulatory pressure from the US SEC and the rest of the world. Exchanges like Bittrex and Poloniex have not listed any ICO token for months now which can result in liquidity issues for good ICOs or token sales.
As I have written before, I believe decentralization and the implementation of Decentralized Autonomous Organizations (DAO's) is the ultimate end goal. However, I do think it is a little early for them to be fully functioning without having solved, or at least handled, the scalability, security and efficiency issues first.
With that being said the battle of the CEX vs. DEX continues and it would be interesting to see if we can go fully decentralized in terms of digital asset trading in the next couple of years. TWINS has a goal of removing every single drop of centralization from the Crypto Market and bring power to the users!
TWINS - https://win.win/
Discord - https://discordapp.com/invite/zZbnYKV
Masternode stats - https://masternodes.online/currencies/TWINS/