Everything You Need To Know About Decentralization

The Decentralized Exchange or DEX are like the traditional Exchange services or platforms in the forex market but to operate with cryptocurrencies. Whether to exchange other cryptocurrencies or fiat money using smart contracts.

What is the difference between this Exchange and a traditional one?

We already told you about a fact that is that it is negotiated with smart contracts. In addition to this, it eliminates any type of intermediary, making transactions more secure and transparent. Uniswap clone Another factor that gives security, privacy and anonymity (we could say the three legs of cryptocurrencies) is that the user controls their assets at all times.

What happened to the first Centralized Exchange?

The first of its kind was Mt Gox which followed a centralized interaction and management model. This generated serious security problems as you may have seen during the hacking of this platform.

For this reason, in 2013 the first DEXs were created, such as OmiseGo or BitShares.

What types of Decentralized Exchange exist?

The aforementioned was only the beginning of what we know today and how this has evolved and today we find three types of DEX:

First generation : First we have the aforementioned traditional exchanges, these are centralized, you must send your cryptocurrencies losing absolute control of them and blindly trusting the good work of the platform.

Second generation: The most basic decentralized exchanges. These change the central piece for a smart contract, which is in charge of making the exchanges. As a smart contract that it is, everyone can see how it works. However, in these you must send your cryptocurrencies, losing possession of them during the time you want to make the exchanges.

Third generation : These allow you not to need to send your cryptocurrencies anywhere, despite being able to open exchange orders with them. They act with a smart contract at the epicenter of the tool, but it allows you to keep the cryptocurrencies in your wallet at all times.Uniswap clone software So if those tokens give you dividends, or voting options in a DAO, you can do it until the last millisecond of the exchange.

What are your advantages and disadvantages?

We cannot stop analyzing what its pros and cons are, let’s go to it.

Pros:

Transparency: It is a totally transparent service

since each contract has certain conditions to be met. If the conditions are not met, the contract expires. These work through a network of interconnected computers, similar to a blockchain network. So they have high security protection. However, they may have bugs. Especially the second generation. As it happened with the multi-million dollar robbery of The DAO

This is because they do not operate with a single server.

Cons:

Usability: Requires prior knowledge of the software

Limited: You cannot trade between cryptocurrencies from different blockchains

Orders: You can only place Limit and Market orders

Time: A Decentralized Exchange operates slower than a Centralized one, which prevents the former from being able to operate at high frequency

Liquidity: Due to their null capacity for manipulation, they usually have little liquidity. Which also raises the spreads

What can put a correct decentralization at risk?

Although in an organization, thanks to decentralization, an important part of the advantages mentioned above could be achieved, it may be that in the end they do not occur due to aspects such as the following:

Bosses do not choose the right people in charge : not all people have the skills or leadership skills necessary to take responsibility for an activity. He may be very good at carrying it out, but he may not know how to lead a team.

Not leaving enough autonomy : due to the fear of letting go of the follow-up of an activity, being too much above the person in charge and not leaving him or her the slightest autonomy.Uniswap clone script It generates insecurity, discussions and mistrust among workers.

Not wanting to spend time explaining tasks : there are bosses who believe that they waste more time explaining the activity than doing it themselves. They do not take into account that this activity is repeated several times over time, and it is in this medium and long term that the real advantage exists.