Neironix - Cons and Pros of Decentralised and Centralised Cryptocurrency Exchanges

Category:  cryptocurrency

The nature of cryptocurrency is tied to decentralization, which is the basic principle of the Bitcoin blockchain technology. Decentralized publishing prevents cryptocurrency from being centrally controlled so that it gives control to all network participants proportionally to their contribution to the network be it proof of work, proof of ownership, proof of service or other collective contribution algorithms for network sustainability and security. However, due to the still very low accessibility to Bitcoin and other cryptocurrency for ordinary people in many regions of the world, people have problems exchanging their fiat currencies into crypto currencies.

The most common place to buy virtual cryptocurrency tokens is exchange of exchanges and exchange of cryptocurrency. Centralized cryptocurrency exchange, which is the largest part of the volume of foreign exchange trading on the cryptocurrency market, is the most popular type of market for cryptocurrency and virtual tokens. However, they truly release their users from the core values ​​of cryptocurrency, namely security and control, because they are the owner of their user's wallet and the key to them. To use centralized exchanges that people need to entrust their money to third parties, who are responsible for securing user funds and providing trading services. In this way it appears that people's cryptocurrency has become centrally controlled and there is no exaggeration in these words.

However, there is an alternative to the centrally controlled cryptocurrency market - a decentralized cryptocurrency exchange. They are radically different from those centered in the platform organization. Trading is done in a truly peer-to-peer manner, they have no user support and they have low liquidity and only very basic features on their trading interface.

Users on decentralized exchanges do not save their funds on the exchange, but exchanges issue tokens or crypto-assets, where temporary user funds are changed to the stock while real funds remain in the user's wallet. When users trade, they only write wallet addresses where funds must be sent and receive them in the appropriate assets in their local wallet. This makes decentralized exchanges immune to theft - there is nothing to steal. And there is no central server to hack because all user devices function like peer-to-peer signal transmitters and to reduce exchange means hacking everything.

Another important benefit of decentralized exchanges is anonymity - users do not need to provide their ID in any situation to use a decentralized exchange. The exchange does not have a central authority that will be responsible for the user interactions that occur on it and therefore there is no need for confirmation of identity. All users agree to be responsible and responsible for all their actions on the exchange.

However, there are some downside points for decentralized cryptocurrency exchanges compared to centralized ones. They have a small operational capacity compared to centralized exchanges. Their regular trading level per second is around several hundred to 10,000 trades per second while centralized exchanges are able to process 1 million and more trades per second.

Another disadvantage is the primitive function - decentralized exchanges have no entry orders, stop losses, margin trading, quality charts for technical analysis and execution of orders on them can take 1 minute or even more. Their primitive functions also produce very low liquidity, which is another important weakness.

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