Cryptocurrencies, or virtual currencies, like Bitcoin have taken over the world of virtual cash exchange by a storm that has reached billions in market capitalization. Taking a look at Bitcoin, for example, it was started in 2008 as a “peer-to-peer electronic cash system” that is not monitored by a central authority. Simply put, it became a fast and easy way where individuals can exchange digital cash much like simply sending files.
The rapid growth of cryptocurrencies became widespread where more and more individuals have invested in this type of digital cash. Nowadays, even banks and governments recognize cryptocurrencies where investors have entered the arena.
However, all the positive news about cryptocurrencies has also attracted hackers and criminals to take advantage of cryptocurrency and exchanges. Hackers try to enter a cryptocurrency user’s account and transfer the digital funds into his own without being traced. With the emergence of new digital currency exchange, users and investors are hopeful that hacking and thefts can be prevented.
Decentralized Exchanges for Cryptocurrencies
Traditional cryptocurrency exchanges work such that “private keys” of users are stored on centralized servers. However, these centralized servers have become more prone to hacks once a hacker accesses a user’s private key. His digital wallet can then be easily emptied out without the knowledge of its owner.
With decentralized exchanges for cryptocurrencies, private keys are no longer stored on centralized servers making it harder for hackers to access them. Furthermore, this type of exchange is not reliant on third parties or is controlled by a specific company or entity, giving cryptocurrency users complete control over their funds.
Advantages of Decentralized Exchanges for Cryptocurrencies
Adapting a decentralized exchange for cryptocurrencies can have many benefits including:
- Users can manage their own funds, giving them full control over it like managing their own banks
- Privacy of users are kept such that registrations and disclosing personal details are required
- There will no longer be server down times since hosting is distributed and decentralized
- Users will no longer have to face the problem of being restricted to a centralized environment which can be taken down
- Governments will not be able to ban cryptocurrency like in China, Russia, and Korea
- Decentralized exchanges do not store details and private keys in a central server which is susceptible to hacking
Disadvantages of Decentralized Exchanges for Cryptocurrencies
Since decentralized exchanges for cryptocurrencies are still something new and still in optimization, there are some disadvantages it can pose including:
- They are still not user-friendly at this stage especially since users are more used to the convenience of a centralized service
- Since it is still in its early stages, users may run the risk of losing funds
- Since there is no central system, you will have to resolve any problems that you encounter with little help or none
The Future of Decentralized Exchanges for Cryptocurrencies
While it may seem that a decentralized exchanges system for cryptocurrency will more likely fail, especially with the difficulties it can pose for the users themselves, it is still something that should be developed further. Governments will most probably reject the idea of decentralized exchanges for cryptocurrencies given the fact that it will also be harder to implement taxes to cryptocurrency owners.
However, the decentralized exchange for cryptocurrency is something that should be fully developed, especially after seeing how huge its market is and how open it is to theft.