24. September 2020

Advantages and disadvantages of decentralized exchanges

In the midst of the boom in decentralized finance (DeFi) that the crypto world is experiencing. Decentralized exchanges (DEX) are gradually becoming one of the favorite products of crypto users. However, to face giants like Binance, these platforms still have a long way to go. Therefore, today we talk about the advantages and disadvantages of decentralized exchanges, as discussed in a panel during the Indonesia Blockchain Week.

Changpeng Zhao recommends caution with DeFi

Greater transparency: the great advantage of decentralized exchanges
When we talk about decentralization, we usually talk about trust. Well, the main reason people seek to decentralize processes is to make them more efficient and transparent than they would be if a single entity had total control over them.

This is also the situation when it comes to decentralized exchanges. For, although the Blockchain technology allows high levels of decentralization in the financial system. It has not had its counterpart in the world of exchanges. Which are mostly traditional companies like Binance or Coinbase.

The main consequence of this is that there is no parallelism between the existing transparency in the Blockchain and the world of exchanges. Where the processes of the companies that manage these platforms are closed. And the handling of our personal information by a single centralized entity, makes us susceptible to hacking against the company’s servers.

Therefore, as commented by the COO of REN Protocol, Michael Burgess, the great advantage of decentralized exchanges over traditional ones is their transparency. Its operation is completely public, and it does not require personal data from its users.