The question we will handle today is ‘what is a decentralized stock market?’ it will be. We know that we all still have a lot of questions about this field, and we also know that we can't just spend our time in the field of cryptocurrencies. That's exactly why we're going to focus on that question today. I'm ready when you are!
Cryptocurrencies are a concept that continues to move rapidly towards global influence as their importance increases and people begin to find more areas to use them. The use of Bitcoin, Ether and other important cryptocurrencies has expanded significantly. In this regard, we know that people buy these coins for various reasons. Some buy these coins for their payments, some for protection against the failures of the traditional financial system, and some for investment vehicles.
There are also several ways to get cryptocurrencies. These coins can be received personally or through an exchange. But no matter how you get your digital money, you will always have reasons to use a cryptocurrency exchange.
How Cryptocurrency Exchanges Work
Cryptocurrency exchanges are platforms where investors can buy and sell one digital currency for another or for a fiat currency. Their main function is to facilitate the transfer of digital assets, but they function much more than that.
The function of cryptocurrency exchanges is quite extensive, and the most popular exchanges have been able to diversify their operations, offering services such as patronage and leverage trading. Some exchanges also tap traditional companies to create spending options for cryptocurrencies. It is not unusual to find exchanges that create bank cards that are already filled with cryptocurrencies. They can also be used to withdraw fiat money from an ATM.
Types Of Cryptocurrency Exchanges
Cryptocurrency exchanges can be divided into several forms. Classification is usually done according to the functions they provide and the type of user they are suitable for. In general, there are three types of exchanges: centralized exchanges, decentralized exchanges, and hybrids. By the way, hybrids are a combination of the functions of Central exchanges and decentralized exchanges.
What Is The Central Stock Exchange?
Central stock exchanges are the most popular stock exchange variety. They are used by users to buy and sell cryptocurrencies. Moreover, they come in different forms and sizes. The most popular Central exchanges are Coinbase, BitMEX, Huobi and OKEx.
One aspect that distinguishes Central stock markets from others is found in ownership structures. Central exchanges are usually owned by one person or group. This person or persons control the platform and charge you a fee for using it.
Most central stock markets are constantly pursuing and motivated by innovation, producing new products and services to keep their customers in an enthusiastic market. That's why most of them often come up with a variety of products. In order to retain customers, some exchanges offer margin trading, retention services and betting services, while others offer special services.
What Is A Decentralized Stock Market?
These decentralized exchanges, also known as Dex, are not managed or run by a person or group, unlike centralized exchanges. Decentralized exchanges are platforms that decentralize functions at the core of a stock market. These include asset trading, order matching, capital deposit and order books. Also, decentralization means that there is no central figure or server. Nodes of the network are deployed. Thus, the tool does not need to be found and allows its users to perform their trades using smart contracts. This reduces the fees associated with central exchanges and speeds up the process.
Examples of the most popular decentralized exchanges are WavesDEX, Bancor, Bisq and uniswap.
Types Of Decentralized Stock Market
There are mainly two types of decentralized stock markets. These are DeX's that are currency-centric and Dex's that are not currency-centric. The difference between them lies in the blockchain where Dex was founded and how many coins you can trade. Currency-centric DeX's are platforms built on a specific blockchain, as the name suggests. If you want, let's go over the Ethereum blockchain now. For such exchanges, the platform allows users to trade only their own created asset, such as ERC20. Those who are not currency-centric have more freedom. The system allows users to connect different digital assets in a decentralized way for secure order management and matching.
Pros and cons of decentralized exchanges
Pros of using DEX
When compared to centralized exchanges, decentralized ones are safe. The lack of a central storage location means that they do not have a single point of error. Even the best central stock market could be compromised and millions of customers ' funds stolen from the company's landfill. This is impossible in decentralized exchanges. On DeX platforms, users have control over their personal keys. They don't hide them in the exchanges. Another benefit of decentralized exchanges is that they are resistant to censorship. DeX platforms are not subject to government laws or censorship. Because they are not controlled by a single person and do not belong to a single person, the government cannot apply any form, control or monitor their operations. This is a big issue because many countries resort to forbidden means to limit or suppress the growth of the cryptocurrency sector in their regions.
Cons of using DEX
The main disadvantage of DeX companies is limited functionality. DEXes do not have many of the useful features. Margin trading, stop loss and many more features are not found in Dex. This, in turn, can interfere with your performance as a trader. Some exchanges are trying to add new features, but it may take some time for these features to become available. Decentralized exchanges are also quite difficult to use, but user interfaces are getting better every day. Another disadvantage is related to fiat currency conversions. You can't convert fiat money because they are against all forms of decentralization. Because if you could do that, it would mean that the platform would open its doors to everything that is not in its soul, which is undesirable. So cryptocurrency investors can trade using only cryptocurrency investments.
Why Is Dex's Adoption So Delayed?
One of the reasons for the slowdown in DeX adoption are the functions that decentralized platforms do not have. Most investor centers use exchanges for reasons beyond just buying and selling cryptocurrencies. DeX platforms are still in a very limited area to influence a wide audience of investors. Low liquidity, on the other hand, is a concern for investors with deep pockets. After that, the government needs to put a leash on the cryptocurrency sector. In America, various government bodies have presented many reasons why they should view transactions on blockchain. The FBI, for example, has said it wants to monitor illegal transactions and protect investors from suspicious operators. The IRS wants to monitor every cryptocurrency transaction for tax purposes. For whatever reason, DeX platforms are created to hide details about users and their transactions from central authorities. This means that the government cannot monitor their activities.