What is DEX Platforms?
DEX refers to Decentralized Exchanges that operate without the need for an intermediary. Here, transactions are conducted directly in a p2p environment between buyers and sellers thanks to the advancement of technology with the help of smart contracts, liquidity pools, and Automated Market Makers (AMMs) Mechanisms.
In our Traditional centralized financial system, every transaction goes through transactional brokerage processes. One must verify his/her identity when transactions happen between a person, a bank, or a broker. Occasionally the authority has the right to demand for additional personal information and even decline to process your transaction.
Another issue with our traditional banking system is that transaction processing time is slow, which often slow take 2-5 days to process a single transaction due to complicated procedures and commission incurrence.
To solve such an issue and lower the cryptocurrency transaction difficulty, the decentralized exchange, DEX, has come to the surface. DEX regulates the supply and demand of cryptocurrency within the exchange through the SMART CONTRACT adaptation. Also, as each transaction skips either authentication or screening of personal information, the time consumed for the transaction and costs, such as commission fees, are reduced.
The Features of DEX Platforms
DEX, the Decentralized Exchange, has a distinct feature that sharply differs from the existing centralized exchange. There are two significant features that we will touch upon below.
1. Smart Contract
The decentralized exchange differs from traditional financial agencies in terms of an organizational system. Financial institutions like banks need the labor force to run them, firms to manage them, and brokers to scrape up consumers. However, in the decentralized exchange, such processes or mediators are non-to-exist. Because instead of humans, the program conducts transactional brokerage, which is the be-all-and-end-all operation of monetary facilities.
This program is called SMART CONTRACT. SMART CONTRACT is programmed to seal the transaction when all the traders meet the terms and conditions in the trade agreement. This application enables prompt and accurate transactions regardless of time and space while processing complex documental reviews or authentication procedures.
2. Personal Information Security
DEX is excellent in anti-hacking by keeping transactional information within the blockchain. Since CEX records its transactional content in the central database, all clients’ data stays vulnerable if a hacker tries to attack the database to steal. At this point, the stolen information also contains hypersensitive information, such as ID cards used in transaction authentication.
On the contrary, There is no central database in DEX. The information is dispersed and stored in a blockchain, and once it is registered, it is hard to counterfeit. Therefore, the client’s personal information stays protected.
The Fortes of DEX Platforms
The fortes of DEX are that it is decentralized. It simultaneously acts as a merit and creates a difference from the centralized exchange because the decentralized transaction method is a way to solve the problem of the existing financial system. DEX strengths boil down to three.
1. Non-KYC Confirmation
DEX does not require ‘KYC,’ the authentication procedure of the client’s identity. CEX demands KYC verification by submitting the real-name financial transaction system to secure transactional stability.
However, while hacked information stored in the database through KYC results in leaked personal information, DEX allows users to participate in all Exchange operations without requiring KYC verification. By directly connecting a crypto wallet with DEX, traders can do transactions, provide liquidity to earn staking rewards, and more.
2. Low Commission Fee
Compared to CEX, the commission charged by DEX is low. CEX grabs a high commission rate as a platform usage fee, mounting up to somewhere between 0.02%~0.05% of the total transaction amount. Contrary to this, DEX does not mediate in transactions but merely demands coin transmission cost. Hence, the sensational popularity.
3. Tradable Unlisted-Tokens
Even the tokens that are not listed in the central exchange can be traded on DEX. Since the central exchange exclusively lists mostly high-profile cryptocurrencies, on many occasions, tokens with relatively low expected value are impossible to trade. However, in DEX anyone can list tokens by providing liquidity for specific pairs without the need for permission from a centralized Exchange.
How to Use DEX Platforms
The way to use DEX is straightforward. Once the virtual wallet is created, you may proceed following the exchange’s guidance. Here are the specific methods based on Ethereum.
1. Create Wallet
Create your own virtual cryptocurrency wallet.
Create a wallet for free by selecting a hot or cold wallet and connecting that wallet to a MetaMask. You will then receive seed phrases that must not be hacked or lost.
2. Purchase and Wire
Purchase Ethereum at CEXs such as Bithumb and wire it through your virtual wallet.
3. Check the information
Check the information on the cryptocurrency you intend to purchase by hooking up with the place which bears the terms and conditions that agree with you or stores the cryptocurrency you are after.
4. Connect Wallet
Send the Ethereum through the wallet and fill in your wallet address for receipt.
5. Check Cryptocurrency deposited
Check whether the cryptocurrency deposited in your wallet through DEX complies with the correct traded amount and information.