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What is DEX (decentralized exchange) and why is it on the rise?

Basics

A lot is happening in the crypto-space. Regulations abound, security fears spreading and more importantly innovation after innovation coming up daily. Cryptocurrency has attracted all manner of speculation, and only those in the know seem to be withstanding these storms and of course making a kill in the process.

While centralized exchanges have been hailed as the easiest means to transact, they are not the safest. In fact, they go against the very reason that led to the creation of Bitcoin: eliminating the third parties in the transactions (peer-to-peer payments). Hacks are not unusual in this trade. The best example is the infamous Bitfinex hack that led to thousands of people losing their hard-earned savings.

Cryptocurrencies present other sets of problems. They have unique identifying features and people must exchange them for their national currencies. Additionally, there are services that are yet to accept crypto payments. This has led to entrusting these cryptos to a third party for a smooth exchange, but as mentioned, it comes with risks.

These problems require a solution and Dex presents itself as a messiah. Decentralized exchange (Dex) refers to an exchange market where the customer’s funds are not held in the third party account.  This is enabled by the use of an automated system which allows trade to occur directly between users. There are many ways in which this has been made possible. Some of the ways include the creation of proxy tokens; creation of assets; and trading through a decentralized multi-signature escrow system.

But why the DEX rise?

Decentralized exchanges have a myriad of benefits that have made it popular. Because the funds are held by you, you don’t have to worry about trust issues. With the centralized system, you need to trust the third party and constantly question their probity. Secondly, a decentralized system is more private and confidential. You only disclose your details to the person selling to you or buying from you, and mostly if it involves a bank transfer. Otherwise, your details are yours and yours alone. Finally, the issues of server downtime do not occur here. This is because the hosting of these exchanges is distributed through the nodes.

Currently, there are other options that have made trading safer, safe from hacks, wrong business models, and insider dealings.

Bitsquare

this is an open source decentralized exchange platform that allows traders to directly buy and sell Bitcoin for national currencies and other cryptos without involving any third party.

NXT

this is cryptocurrency platform which allows users to trade on assets under the same coin, NXT. It doesn’t allow other cryptos as well as asset-to-asset exchange.

CounterParty DEX

this is a crypto platform that allows anyone to issue assets or tokens within the Bitcoin sphere.

Bisq & Openledger

Bitshares has its own currency, Bishares (BTS) where clients can trade BTS, Market Pegged Assets (MPA) and User Issued Assets (UIA). Openledger is basically the web-based version of BTS that runs on the same Bishares.

However, there are many more in the development stage, and soon the list will grow as the demand for DEX exerts pressure on developers. All in all, DEX is here to stir the course, restoring the cryptocurrency to their original state of doing away with third party regulations.

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