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cryptocurrency it is often associated with the word decentralization. Decentralization refers to the distribution of operations and data while removing any third party in the process allowing a user to communicate directly with another user. Cryptocurrency is based on the concept of decentralization, but it is widely traded centrally crypto exchange. But lately we hear a lot about decentralized exchanges (DEX) and decentralized crypto wallets like MetaMask. In this article we will find out what are the advantages and disadvantages of decentralized exchange offices and wallets.
Also, read | 7 best hardware crypto wallets for offline cryptocurrency storage in India
Centralized and decentralized stock exchanges and wallets
People’s interest in DEX has grown over the years and is likely to play a key role in the future of cryptocurrencies. Therefore, it is best to learn a few things about them, how they differ from centralized exchanges and the advantages and disadvantages of decentralized exchanges and wallets.
Let us recall what centralized and decentralized stock exchanges are.
What are centralized exchange offices and wallets?
Centralized exchange offices work just like a bank. They are a single entity that holds all transaction records, identity and other personal data of an individual. They are reliable and are a good way for new users to start investing in crypto and NFTs because they allow you to buy and sell cryptocurrencies for money directly through your integrated wallet.
But they also have drawbacks such as server downtime, maintenance, holes, and hacking chances that can also provide access to wallets and transaction history. . These issues are a cause for concern and some users are simply not comfortable sharing so much of their information with the app itself.
What are decentralized stock exchanges and wallets?
Decentralized stock exchanges that we will call DEX from now on they are quite the opposite. They provide a seamless experience and also work as a digital bank. But personal data is not needed here because trading can only be done through cryptocurrencies, and wallets have private keys that only the user can access.
Security is also a very minimal threat due to its distributed nature and essentially works as a routing layer corresponding to blockchain trade orders.
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Advantages of decentralized stock exchanges and wallets
Robust infrastructure
DEX does not have a central server. Data is distributed across the network so that if one system or server breaks down, it does not affect the entire network. This essentially eliminates any server downtime, and maintenance is possible without affecting the network.
Wallet and account security
We often hear about data breaches in banks and large corporations. This often results in data leaks of many of their customers online.
In a decentralized exchange, even if the hacker manages to find a hole and break through security. They will not be able to access and obtain information about other people’s accounts. Moreover, they will not be able to access someone’s wallet’s private key as much as possible in a centralized exchange.
Privacy and anonymity
DEX and decentralized wallets allow anonymous invoicing. You do not have to provide any documents to prove your identity and bank details. This is sensitive information that people are reluctant to disclose and rightly so.
This is why if you care about privacy and anonymity then DEX is a great option.
Related article The best places to buy anonymous Bitcoin without KYC
Without government interference
We all know that cryptocurrency is a tricky topic and many countries still have trouble understanding and adopting it. Some have even banned their trading and ownership altogether.
Since you do not have to provide any proof of identity to create a DEX account, you can use these exchanges and wallets without any government interference due to their decentralized and distributed nature.
Although we would not advise you anything that is against the law.
Also, read on | Crypto Regulation Act 2021 in India: 5 points you should know
Deficiencies of decentralized stock exchanges and wallets
Limited possibilities
Due to their nature of collecting less data, you can now use them to trade cryptocurrencies. Also don’t support a range of new and growing cryptocurrencies and tokens so your options will be limited to Bitcoin, Ethereum, and several other known cryptocurrencies.
Centralized exchanges allow for a wide range of new coins and tokens NFTs and even Metaverse coins. some of them even have platforms that you can afford forge your own NFT.
Liquidity is difficult
Liquidity means the ease of converting an asset or, in our case, a cryptocurrency into cash without affecting its market price. Because DEX does not ask for your bank details, you cannot trade your cryptocurrencies for cash and vice versa. This makes it difficult for users who want to sell their cryptocurrency and transfer it to their accounts.
Although some decentralized exchanges allow you to sell your cryptocurrency in exchange for gift cards for different platforms, you can even use those gift cards to buy cryptocurrencies on those exchanges.
Related article Simple steps to convert Bitcoin and other cryptocurrencies into cash
Concerns of trust
Because of their nature of providing anonymity, it is difficult to trust an exchange and invest their precious cryptocurrencies in it. Some people have already reported fraud by fraudulent decentralized stock exchanges and this creates a lack of trust in the whole system.
There are very well known and reliable exchanges that you can trust and invest in your crypt Paxful. But still, there are limited options in the case of reliable DEXs and wallets.
Beginner Enemy
Using a decentralized network requires some prior knowledge. Although the learning curve is not that difficult, the chance of making a mistake and losing all your cryptocurrencies is high due to the above points.
You don’t have to be a crypto veteran, but you should have some existing ideas on wallets, money changers, crypto and decentralization. And unlike centralized cryptocurrencies that provide a guide and more frequently asked questions, as well as appropriate support staff to answer your queries. Decentralized exchanges usually rely on the support of developers and the community to solve your problems.
Finish
There are positive things for those who prefer privacy and do not hesitate to go through various steps and learning curves. For the general public, we suggest going to centralized exchanges such as CoinDCX, WaxirX, Coinbase, etc. We hope you can now better distinguish and understand the advantages and disadvantages of decentralized crypto exchanges and wallets.
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