The Importance of Decentralized Exchange Websites
bitdeal as a bitcoin exchange software and solution provider, We always look forward to the uptrends of cryptocurrency industry. Hence we found an interesting cryptocurrency trading model, which could create a revolution in the entire cryptocurrency trading industry. Let's discuss in detail below.
Centralized Exchange Websites: Uncertainty about Security
Nowadays, It seems to be really hard for an average trader to find a well secured and user-friendly cryptocurrency exchange, because the industry is now expanding to another level, hence it created an opportunity for smaller exchanges to rule the network. But, the question here is, are the existing exchange websites really secured?. The answer is only 30% of exchanges offers secured layer to its traders, others used to provide an uncertainty of security. Why?
Because most of the existing exchange website are centralized exchanges, which means the entire control of funds is under a third party. So obviously it will create a route for unexpected hacks, server downtime, loss of digital assets, inefficiency in transaction tracking.To prevent all these issues, blockchain is now getting powered by decentralized exchange websites!
So, What is an actually decentralized exchange website? , Before that, we would like to clear you about how a centralized exchange website will work.
Centralized Exchange Website: How it works?
For your information, the most popular exchange websites are "Centralized" Example: Bitfinex. But the sad story is bitfinex, become a bad example for unsecured cryptocurrency exchange.
In general, a traditional cryptocurrency exchange always have a user registration, where they will collect, 100% pure KYC details about the registered customers. Every time whenever a trader request for a trade they have to pay a minimum transaction fee. If a user wants to sell a certain number of bitcoins, at first he needs to deposit the bitcoins to the admin wallet. Whenever the trade enables then the bitcoins will be credited to the beneficiary account.
Centralized exchanges used to store all the private keys in a central cloud server, this becomes the reason for susceptible to unexpected hacks. So here the security system is at "zero level".
The only real time benefit of centralized exchanges is "It is easy to use and access advance trading functionalities".
A decentralized exchange is an exchange platform which does not depend on any third party services to control the customer's digital funds. Here the trade occurs directly between the user to user and there is no work for admin to control the funds. Traders don't need to deposit their funds into admin account while initiating the transactions. Instead, they could directly trade from their own cold wallet or hot wallet. Decentralized exchange website will not store private keys on a central cloud server. So, sure this will be very hard for hackers to hack.
Benefits of Decentralized Exchanges over Centralized Exchanges
1. It creates a trust for your exchange business
2. It requires zero KYC, but provide 100% privacy
3. No need to transact your funds to a third party wallet before initiating a bitcoin or cryptocurrency transaction
4. Here User control funds
5. No Hacks and no server downtime
6. The hosting is distributed through nodes so there will be no server downtime
7. Here your coins are yours
Since decentralized exchanges are hard to trace funds, sure it will be a problem for government regulatory service to perform taxation.
Hope you have got some basic knowledge about decentralized exchanges and centralized exchanges, wait for the next article to know how to make a decentralized exchange site?
Bitdeal develops a fully secured and decentrlaized exchange script for entrepreneurs which will support to setup a decentralized exchange website with advance trading features.