“Not your keys, not your coins”
Decipher the popular adage “Not your keys, not your coins” from Bitcoin enthusiasts: “If it’s not your coins, it’s not your money”!
Are you new to the world of Crypto? Bitcoin? Ethereum? Have you, at least, heard of the famous Mt. Gox and Coincheck cryptocurrency exchanges that underwent cyber-attacks? Do you comprehend the value of having your money in your own pocket versus the value of having your money in someone else’s pocket? The sudden demise of the CEO and Founder of cryptocurrency exchange QuadrigaCX, who held private keys to the cold wallets, rendered inaccessibility to the repositories incurring a loss between $140 and $190 million in crypto assets Bitcoin and Ethereum? Do you now comprehend the value of having your money in your own pocket versus your money in someone else’s pocket?
Assuming your familiarization with today’s fiscal framework and central trading concerns of cryptocurrencies — commonly known as Custodial Exchanges, the safest strategy, as a trader, is to enter and exit as swiftly as possible. Time is of the essence…stashing away huge sums within an exchange can be disastrous! Risks must be spread across multiple exchanges with an eagle’s eye on regulatory, insurance and audit mechanisms in place. Custodial Exchanges, fundamentally, violate the pillar of a decentralized economy. However, we are compelled to use them for lack of another option.
The majority of trading by volume today stems from centralized exchanges. Key contributions facilitating the market trend are that centralized exchanges offer easy FIAT conversions, advanced trading tools, quick liquidity for traders- posing threats and challenges to the decentralized exchanges! These are pertinent pain points that are being systematically and smartly addressed with technological advancements and innovations in the world of Crypto!
In a DEX, you can freely participate in peer to peer trading connecting buyers with sellers directly, without having to worry about the safety and security of your funds. The users’ funds never leave the market until an actual deal is struck. When you create an order in a decentralized exchange, your order is directly matched with the buyer/seller. Once both parties show an expression of interest and agreement, the transaction stands executed and affected. This makes the entire process transparent to both the parties making the actual trading volume real and visible to the traders. No room for faking the trading volume! An open marketplace!
It’s about time we start giving a deep thought to Decentralized Crypto Exchanges. Decentralized Exchanges, commonly referred to as DEXs, are the new reliable, secure and foreseeable exchanges where you are in full control of your funds at all times. Your private keys are not stowed away with a centralized third party who claims to be the custodian, but vests in yourself, in your very own wallet! You are your own bank, synonymous with carrying money in your own wallet. If you lose your wallet, you lose your money! Remember to indulge in careful key management to secure your private keys. Never store your keys on email, online drives or notes in your smartphones! As a rule of thumb, keep your private keys in hardware deterministic wallets, back up your mnemonics on paper and secure it.
Centralized exchanges hold the view that the emerging fiscal revolution is a blend of both the perspectives, decentralization, and centralization! This is bound to prevail, for some time now, as DEX technology firmly roots itself and rolls out the deliverables with full potential. More interestingly, the phenomenon has already set its trajectory! It is happening now…. And with cutting edge, groundbreaking technical prowess, the most popular centralized exchanges will soon be switching to this new operating model!
Decentralized exchanges are going to be an essential tool for trading cryptocurrencies. With an increasing number of side chain frameworks and enhancements in the Ethereum protocol, transaction speeds and block time will continue to improve. An infallible, unerring privacy based system is the true essence of the Decentralized exchange.
DEXs are definitely here to stay to lead the next generation of cryptocurrency exchanges! Time will record the evolution! Much sooner, than later DEXs will rule the world!
Author: Ahmed Al Marjeby
