People who have traded cryptocurrencies have most likely used centralized exchanges such as Binance or Bitfinex. However, DeFi continues to grow in 2022 as the world moves closer and closer to decentralization.
The key problem with centralized exchanges is that they are run by a central authority – a company that controls your funds and data just like a traditional bank. In addition, centralized exchanges use the order book model that you would see on traditional stock exchanges, with a list of buy and sell orders.
Here is when token swaps Odos step in. But are there any other reasons for the CEX competitor’s emergence?
How DEX evolved?
The first decentralized exchanges were very slow. In 2016, EtherDelta introduced itself to a more futuristic DEX. The platform used smart contracts to manage trading wallets in a traditional order-book model. This model was not compatible with Ethereum, it lacked liquidity and had a difficult user experience.
In 2018, a new generation of decentralized exchanges came to the first slaughter. They used:
- automated market makers;
- asset pricing dictated by permissionless protocols;
- liquidity pools rather than buyers and sellers.
In 2020, decentralized exchanges became very popular.
Why industry required decentralized token swaps Odos
Apart from the obvious flaws of CEXs their colleagues solve a bunch of other issues. Unsurprisingly, the DeFi trend is booming these days!
CEX crypto exchanges are essentially no different from a centralized government. They are managed by a few elected people. They make decisions, flush trading, short market sales, and manipulate the market.
Centralized exchanges are commercial platforms that profit from commissions. Their owners have access to entry/exit points of people who want to join the ecosystem. Because of this, inexperienced users are not in the most advantageous position for themselves. This is not in line with the ideology of the cryptocurrency community on which the blockchain is based.
Decentralized exchanges solve this problem, as they are not owned by specific individuals. They operate as trading sites that are run by the community.
Safe tokens storage
In the case of centralized exchanges, coin holders must invest their own money, giving up asset management. This disadvantage manifests itself in emergency situations (hacker attacks), and because of it people lose their savings.
Although there are many ways to hack exchanges in the cryptocurrency industry, decentralized platforms do not have this disadvantage, since people’s tokens are stored on their devices.
Token swaps Odos are based on blockchain technology where there is no common point of failure. This reduces the level of vulnerability to hacker attacks.
Decentralized exchanges provide privacy, as people do not need to be identified. Centralized exchanges, in accordance with the law, require asset holders to verify their identity. This may not please users who value the privacy of information.
Over to you
Having all this there is no doubt that the DEX’s drawbacks are just temporary. Looking back DeFi did a great step toward worldwide adoption. Anyway, even today their benefits greatly outweigh all criticism.
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