Cryptocurrency, sometimes called crypto-currency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions. Cryptocurrencies don't have a central issuing or regulating authority, instead using a Decentralized Exchange Development system to record transactions and issue new units.
If you’re wondering where to buy cryptocurrency, using a cryptocurrency exchange platform is likely where you’ll start your investment journey. Cryptocurrency exchanges are online platforms used to buy and sell cryptocurrency. These platforms are intermediaries between the buyer and seller, allowing users to trade cryptocurrencies using fiat money or altcoins.
Many investors opt to use cryptocurrency exchanges due to their relatively low trading fees. However, keep in mind that some platforms might not be beginner-friendly, tending to overwhelm users, particularly those who are not familiar with trading stocks. For that reason, it’s important to understand the differences between each exchange platform to find the one that works best for you.
How does a decentralized crypto
trading platform function?
- 1) Technical Functioning
Firstly, the order needs to be
placed by a token owner to exchange his acquisitions with another asset
available on DEX. Here, the token owner needs to specify the number of units
they want to sell and the cost of the token. They also determine the period by
which their assets will be available for bids.
Subsequently, other users can
submit bids by singling a buy order once the selling order gets placed.
Finally, the bids are reviewed by both parties. This selling process is initiated under the stipulated time set by the sellers.
- 2) What you do as a User
As a user, you need your wallet
address to log in to the blockchain of the decentralized exchange.
You can then submit a buy or sell
request on your application.
Once the smart contracts are performed, your assets will get transferred, and you can disconnect from the blockchain.
Advantages of using a DEX
Trading on decentralized exchanges can be expensive, especially if network transaction fees are high when the trades are executed. Nevertheless, there are numerous advantages of using Decentralized Exchange Development platform.
- Token availability
Centralized exchanges have to individually vet tokens and ensure they comply with local regulations before listing them. Decentralized exchanges can include any token minted on the blockchain they are built upon, meaning that new projects will likely list on these exchanges before being available on their centralized counterparts.
- Anonymity
When users exchange one cryptocurrency for another, their anonymity is preserved on DEXs. In contrast to centralized exchanges, users do not need to go through a standard identification process known as Know Your Customer (KYC). KYC processes involve collecting traders’ personal information, including their full legal name and a photograph of their government-issued identification document.
- Reduced security risks
Experienced cryptocurrency users who custody their funds are at a reduced risk of being hacked using DEXs, as these exchanges do not control their funds. Instead, traders guard their funds and only interact with the exchange when they wish to do so. If the platform gets hacked, only liquidity providers may be at risk.
- Reduced counterparty risk
Counterparty risk happens when the other party involved in a transaction does not fulfill its part of the deal and defaults on its contractual obligations. Because decentralized exchanges operate without intermediaries and are based on smart contracts, this risk is eliminated.
Summing up
0 Comments