Everything you should know about Decentralized Exchange (DEX)
Find out why Decentralized Exchanges have become a solution for security holes remaining in centralized ecosystems.
What is Decentralized Exchange (DEX)?
A decentralized exchange is a cryptocurrency trading platform that operates on a blockchain, in which no single entity controls the flow of funds. In contrast of centralized models (Coinbase, Binance, Bittrex,etc), all trading transactions on DEX occur directly between users in a peer-to-peer (P2P) network without being manipulated by any other irrelevant individuals. DEXs alleviate issues such as server downtime, market manipulation, loss of funds, hacking and other insecurities which users commonly deal with in centralized exchanges.
Centralized vs Decentralized
The biggest benefit of a DEX is its decentralization, which revolves around the philosophy of cutting intermediaries and returning peer-to-peer, permissionless interactions. In a centralized system, users are often required to ‘trust’ the service provider without giving a full guarantee of its security and honesty. Decentralization creates censorship-resistance, which means no central authority could enforce regulations or any changes in the exchange system. In fact, bans on cryptocurrencies from certain countries such as China and India alter the ability of crypto trading on centralized models, while DEXs are open-source codes which are impossible for any individuals to gain the control.
Another merit of a DEX includes high-oriented security. The hosting of DEXs distributed throughout the nodes reduces the risks of server downtime and the possibility of hacking. Since users are the only ones that have private access to their own funds, there will be no central point of attack.
In fact, massive security attacks happened on centralized exchanges, which is just a matter of time. Dating back to the infamous case of Mt. Gox in 2014, roughly $470 million was stolen from the centralized hot wallets of the exchange. Hackers also pulled it off with Coincheck as more than $500 million of digital tokens were stolen from its centralized exchange. Even though the company claimed they did own up a security lapse, the security holes were still located. There is a long history of online robberies at cryptocurrency exchanges that has formed up questions about the security of centralized foundations.
Nick Szabo, known as the first person to propose smart contracts, has criticized that ‘the invocation or assumption in a security protocol design of a ‘trusted third party’ constitutes the introduction of a security hole into that design’.
“Trusted Third Parties are Security Holes”
— Nick Szabo
Technically, all transactions facilitated on DEXs are based on Smart Contracts. Smart Contracts are computing protocols on top of a blockchain, with encrypted set of rules between permitted users. According to this, transactions are only confirmed by the network of nodes once certain conditions on the smart contract are met. Smart Contracts secure the flow of funds and render transactions traceable, transparent, and irreversible. The only way for an attacker to succeed is to compromise one of the two parties.
A DEX could facilitate faster and cheaper transactions than a centralized exchange since there is no fee charged by the third party. The only fee users have to pay is Gas Fee — the cost of sending transactions over the Ethereum blockchain.
What is HB DEX?
HB DEX is a 100% decentralized exchange conducted on the peer-to-peer protocol, which enables users to exchange crypto assets directly between each other with no requirements for personal data. The decentralized exchange operates entirely on HB Wallet Desktop Application, which is more secure than any web-based exchanges and wallets.
Built on top of the Ethereum blockchain, HB DEX covers all functionalities that offer users a seamless crypto trading experience, from storing tokens, conducting transactions, paying fees to checking for transaction statuses. The process is faster, less expensive, and solves the trust issues occurring within centralized exchanges.
The full-fledged exchange also supports real-time trading with any tokens on ERC-20 for ETH and vice versa.
HB DEX is synchronizable across platforms, which means users can sync their wallets into the HB Wallet mobile version and monitor their assets from mobile devices.
On top of that, HB DEX is 100% free. Users will only have to pay a small amount of Ethereum fees for validating their transactions.
Coupled with these powerful functionalities, detailed tutorials on how to perform transactions on HB DEX are also included within the platform to give users the fullest support.
