Cryptocurrency exchanges are platforms that initiate the trading of digital coins. This could be better understood with an example of the stock market. Just the way, stock exchanges display the use of stocks, cryptocurrency exchanges handle the trade of virtual assets. Cryptocurrency exchanges are a relatively new concept still, and people are yet to get a hang of it fully. However, since a lot of investors are taking interest in cryptocurrencies, it is important to decode the types of crypto exchanges as well. Decentralised crypto exchanges are one such platform.
So, what are decentralised crypto exchanges (DEXs)?
As the name suggests, these exchanges operate in a decentralised manner, without any interference from a third party. Decentralised cryptocurrency exchanges allow the users to use peer-to-peer (P2P) transactions. This process relies on automated smart contracts. However, all decentralised exchanges do not have the same infrastructure. Some of the popular examples of DEXs include Uniswap (V2), Tokenlon, 0x Protocol and Venus.
Why should you opt for DEXs?
DEXs must be your go-to option if you want complete privacy since they are anonymous. Centralised crypto exchanges may ask you for know-your-customer (KYC) details, but DEXs work on the basis of anonymity.
2) It's comparatively cheap
Centralised exchanges bear the additional cost of setting up and maintaining infrastructure to offer secured services. Whereas, decentralised crypto exchanges work on the principles of automation and self-regulation that make them cheaper comparatively. DEXs would help you cut down all the additional costs.
3) Less hacking risk involved
Decentralised exchange makes the hacking risk almost next to impossible. If you are an investor who is most concerned about hacking issues, this is the best choice for you. You do not have to exchange assets to a third party in between which makes it less prone to hacking.
4) Control on your money
You have full control over your wallets and funds. To carry out transactions, it doesn't ask you to transfer funds to a wallet or any trading accounts. After all, having an e-wallet, just like in the case of a centralised exchange platform, increases risks.
Having said all this, decentralised exchange comes with its set of disadvantages as well including that it doesn't initiate the trade of fiat currencies. Unlike centralised exchanges, decentralised crypto exchanges don't provide friendly features. DEXs can be full of complexities.
So, make a wise choice.