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Decentralized and centralized exchanges – what’s the difference?
20.09.2018
242Views
Decentralized exchanges are the future of cryptocurrency trading. With centralized exchanges continually falling victim to hackers and thieves, millions of dollars in crypto have been stolen. It’s worth making the switch.

The crypto community has always been committed to decentralization and transparency through open-sourced project development. While some projects have centralized authorities in the form of their development teams, many continue to rely on open-source platforms like Github for their progress. Operating in contradiction to to these ideals, centralized exchanges represent the opposite of the prevailing crypto narrative of decentralization.

Centralized exchanges

Centralized exchanges operate in the same way traditional equity brokerages do. For those not familiar with the stock market, centralized exchange are for profit companies that earn revenue through their fee and commision structures. Buying and selling crypto costs the user exchange fees, which can add up substantially over time, eating into a trader’s profits. One advantage of centralized exchanges is in their ability to transact fiat-to-crypto transactions, unlike decentralized exchanges which can only transact crypto-to-crypto. Another advantage of centralized exchanges is in their simplified user experience, but users should know that they are trading security for convenience when using such products.

Decentralized exchanges

Decentralized exchanges

Contrary to centralized exchanges, decentralized exchanges operate immutable distributed ledgers, routing ordering information through the blockchain and allowing direct peer-to-peer transactions. Some of the benefits of decentralized exchanges are their anonymity and the fact that they are open-sourced. Because there are no centralized servers or databases that are vulnerable to attack by cybercriminals, assets stored on the blockchain are secure. In addition, their order books are fully transparent and they have no downtimes, as their infrastructure is nearly invulnerable to break downs and DDoS attacks. Get to know more advantages in our Whitepaper!

On the other hand, centralized exchanges can suffer from abuse by centralized authorities, are not anonymous, and as centralized ledgers they are vulnerable to attacks by cyber criminals. Keep in mind that once a centralized exchange is breached and private key information stolen, funds are gone forever.

What choose?

While decentralized exchanges are often more complicated to use and can be confusing for first timer users, their advantages over centralized exchanges are numerous. Serious traders should familiarize themselves with decentralized exchanges if they wish to access increased security, anonymity, and enhanced user control.

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