Decentralized Exchanges Are Disrupting Centralized Exchanges

The cryptocurrency industry keeps growing by the day, bringing in new and institutional investors alike trading with the world to magnify their portfolio. In the beginning, it was hard to buy in crypto from FIAT currencies let alone trading with other cryptocurrencies. Mt Gox was one of the first bitcoin exchanges in cryptos infancy. By 2014, it was managing 70% of trades, but unfortunately, hackers attacked the centralized exchange and stole 800,000 BTCs months later.

Mt Gox was vulnerable at that time, according to the exchange CEO Mark Karpelès:

Most centralized exchanges store your cryptocurrency holdings within a hot wallet. A hot wallet stores bitcoins private keys online, since these exchanges store their clients’ holdings in one hot wallet if a hacker gets holding of that private key, he is able to steal all funds within that wallet. After MT Gox, massive hacks to centralized exchanges happened in the past years as well (many are now looking elsewhere storing their holdings in different wallets, cold wallets, offline, USB etc.)

Here is a list of major cryptocurrency centralized exchange hacks

A lot of people lost shares in their holdings during the hacks, developers got right into finding a better solution to centralized exchanges.

**note we use DEX as a shortening for decentralized exchange.

DEX Have been an alternative to centralized exchanges were traders can trade peer to peer without the need of a third party for execution. For example, if John holds 1 Bitcoin but wants to trade for Ether, the DEX will find him a trading partner and lock in the best settlement trading rate between bitcoin and ether. As John approves his 1 Bitcoin trade with his partner say, Elliot who will have to approve the trade of 12 Ethers, the DEX swaps the cryptos to respective addresses provided.

The biggest problem with these exchanges is that they are not very user-friendly, and are still under development to perfect their network.

Here is a list of decentralized exchanges:

What is your favorite decentralized exchange and why?

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