TWINS by New Capital will be revolutionizing decentralization by innovating a completely decentralized exchange platform and proof-of-stake ecosystem enriched with cross-chain atomic-swaps capabilities to facilitate the direct transfer of funds between the network users. While we hold on to our excitement, its vital to go over the difference between Centralized and Decentralized exchanges and how TWINS can add a value in the near future-
A centralized exchange is a professional entity that provides users with a platform, while monitoring trades, checking the order books and making sure they are compliant with local regulations. Dealing with a centralized exchange you will have interactions with a third party, which in many cases is the company running the exchange.
Some examples of centralized exchanges are: Huobi Pro, , GDAX, Kucoin and OKEx. TWINS Dex will help users to avoid the risks of centralized exchanges and make sure that a third party is no necessarily required.
Centralized exchanges and why are they used
Despite the and industry main focus on decentralization, there are reasons that this industry is currently using centralized exchanges —
1) When analyzing the volume on digital asset exchanges, you immediately notice the absence of decentralized exchanges on the list of highest ranking exchanges. Without good liquidity an exchange cannot function properly as the discrepancy between buys and sells needs to be limited. Centralized exchanges tend to have a better liquidity rate, making top rated exchanges ideal platforms to execute high-quantity trades.
2) Because of the extensive development resources after the initial funding and the high daily earnings, centralized exchanges have the capital to develop and update their platform to adapt to their customer’s needs, making it easier to use.
3) In light of recent regulatory upgrades, centralized exchanges have to adapt to government regulations. Most centralized exchanges have recently updated their terms and the majority that hasn’t, is already implementing know-your-customer (KYC) and anti-money-laundering (AML) user requirements.
4) Centralized exchange trades can usually be executed in a fraction of a second, because of the internal optimized system. Margin and stop-loss functions can be added in contrary to decentralized exchanges that cannot implement these features at the moment.
In summary: centralized exchanges tend to provide a better market liquidity, have an easy to use platform, are regulatory compliant and enable fast transactions.
Disadvantages of Centralized Exchanges –
Centralized exchanges are often criticized for their high listing fees. Some of the centralized exchanges have faced security breaches, allowing hackers to steal a substantial amount of money. Being regulatory compliant can be seen as a disadvantage as well. Users that want permission to trade on the exchange need to verify their identity by submitting their identification papers. Complying makes users vulnerable to identity breaches as you need to trust the person handling your verification to be of good faith.
There are some question marks at the current state of decentralized exchanges. Questions that occasionally pop up are: How decentralized are they? What will happen if they get hacked? Who can stop a malicious actor from scamming or hacking users? In the case of massive real-world , how can a DEX function with having scalability issues? How to trade a without proper liquidity?
Security is still a major issue in the exchange market. CipherTrace, a security firm, recently announced a total amount of 731,000,000 USD worth of has been stolen in the first half of 2018, due to security breaches and hacks. Centralized exchanges Bithumb, Coinrail and Cointrack were some of the companies that fell victim to hackers.
Not only centralized exchanges have been the target of attackers. Etherdelta had a security breach late last year and just recently Bancor Network had a malicious actor attack the network, which resulted in the theft of 13,500,000 USD worth of . The total amount of the heist was actually much higher, but Bancor managed to regain control of 10,000,000 USD worth of by freezing them.
The safest way to trade on a decentralized exchange is by connecting your hardware . Some of the decentralized exchanges, like Idex and Etherdelta have Ledger or Trezor support integrated into their platform. This way you do not sign over control of your private key and a hacker cannot steal it. You can also use a Google Chrome add-on extension like Metamask to trade safer. You will need to check to be sure you have the official version of Metamask downloaded from the Google Chrome web .
Published at Wed, 27 Mar 2019 02:32:56 +0000
