Decentralization : this term is the mantra of the complex crypto-currencies. However, when we buy Bitcoin, Ethereum or Litecoin on Binance, Coinbase or Cex, we have to trust, to an actor centralized. Ironic, is it not ? Despite the quality of the exchange platforms for crypto-currencies cited, this creates disadvantages and problems. In this article, we propose to you to discover why we need platforms decentralized to exchange our crypto-currency.
Platforms decentralized already exist
In preamble, let’s start by clarifying that such platforms, independent already exist. The most well-known is without a doubt EtherDelta, which allows you to exchange any token ERC20 from the moment it is transferable. Therefore, it is possible to buy on ED of crypto-currencies that are not found elsewhere, for example, when the ICO has just concluded and that the tokens have not yet been added to the offer of a platform for the exchange. Unfortunately, EtherDelta is far from offering an experience worthy of the name. This is why many investors prefer to keep away from. Among the other commendable initiatives in this field include Bisq, Waves Dex, OpenLedger Dex, Bitshares, etc
The volumes traded on these platforms, however, are very modest, which impacts liquidity. Yet, we have every interest to use them to resolve many of the problems caused by the exchanges that are centralized.
The issues arising out of exchange platforms centralized
When you want to trade crypto-currencies on a centralized platform, you must first transfer your corners on the platform. Once the operation is performed, you no longer have control of your crypto-assets : to recover, you need to rely on the good will of the exchange. In general, transfer their cryptos to one of his personal portfolios is not a problem, but this is not always the case. Here are the problems that you might face, sooner or later…
- Withdrawals temporarily interrupted : this concern encountered on the platforms of centralized is quite common. For one reason for another, we announce to you that the withdrawal of the crypto-currency MachinChose are momentarily interrupted. Knowing that the notion of temporary may vary from a platform to another (it could last weeks, I have personally experienced). In short, you can at any time find yourself unable to recover your funds, without any recourse.
- Modification of the terms and conditions of withdrawal : in the continuity of the first point, the exchange platforms centralized may also change without notice the terms and conditions of withdrawal. Among those that are likely to cause you misery : change in the amount of minimum withdrawal, increased withdrawal fee, etc
- Temporary disappearance of your funds : some users have reported that the transferred funds were never credited to their account balance. In the vast majority of cases the problem is resolved, but after a long waiting period (the helpdesks are often saturated).
- Final disappearance of your funds : it is of course the worst case scenario, but it still happens too often. The owners of a platform that will disappear in the nature, hacking, real or fabricated, which makes the platform for the exchange of crypto-currency to be insolvent… Last example in date : BitGrail.
Decentralised Application Bisq – Source bisq.network
The benefits of platforms decentralized
With a platform for the exchange of decentralized (DEX), all these potential problems disappear. In such an environment, you are dealing directly with an investor who wishes to perform the operation otherwise. The funds move directly from the portfolios ‘ respective personnel, so that no party is able to exercise control over them. For example, if you want to buy Litecoin for Bitcoin, the platform decentralised puts you in touch with an investor who wishes to exchange Bitcoin for Litecoin. When an agreement is reached regarding the price, your bitcoins are sent to the portfolio of the investor who wished to purchase, while you receive litecoins from its own portfolio.
- You are always master of your corners
- The transaction is done, no need to make withdrawal to your wallet
- No counterparty risk : if the platform decentralized disappears, you are not impacted
- No risk of bankruptcy or hacking
- No administrative constraints : there are no documents asked, no limit is imposed
- The addition of a crypto-currency to the offer does not depend on the good will of the platform (which requires a fee, sometimes exorbitant to add a crypto-currency to its bid)
In theory, this sounds perfect. Given that there are already platforms decentralized, why investors use them-they no more ? Because the concept is still in its infancy, this creates disadvantages, while the very nature of the decentralization imposes limitations conceptual.
- Difficulty : use a platform decentralized is usually more complicated compared to an actor such as Binance. Investors in cryptos are often people in a hurry, they therefore have not taken the time to assimilate their modus operandi
- Liquidity : because of this user experience lower, few investors use these platforms, which means that the liquidity is very limited. Which complicates even more their use. This vicious circle does not promote their adoption
- Cash/crypto : this concept complicates the exchange of cryptos against euros or dollars (Bisq the offers, it is the only to my knowledge)
It is already possible to circumvent the risks, which vary depending on the platforms, exchanges, centralised, exploiting alternative decentralised, but the price is a user experience inferior. It should however be noted that the concept of DEX is still in its infancy. It should be much improved in the months and years to come. Ultimately, it may well be that it is required.
Binance, for example, aims to become a platform for decentralized. Bitfinex the controversial just announced yesterday the creation of EOSfinex, a platform for the exchange of crypto currency is decentralized, which will be the chain of blocks EOS.
It is not only for the users that decentralization offers advantages. For the interim, this concept enables us to largely eliminate the risk of the security of crypto-assets of their clients.
Source : Bitfinex announcement EOSfinex