3 Noteworthy Ways Of Decentralized Exchanges (DEXs) Keep Your Crypto Assets Safe
3 Ways DEXs Keep Your Money Safe
The recent Binance hack might not have been the biggest int he history of crypto but it did shake the industry nonetheless. Binance has been able to attain an almost mystical amount of trust from both the market and its community regarding the safety of users funds, so when the hack happened, many were in total disbelief.
The simple fact of the matter is that centralized exchanges ill always be a target for hackers looking to profit and that is because of the nature of a centralized exchange. You need to deposit funds (and coins) and all trades between users are done on the exchange itself.
The old crypto motto of “not your keys, not your coins” now rings true more than ever before. If Binance could get hacked, any exchange can get hacked and not all of them are as well funded as CZ's brainchild. That means every single coin on the exchange is going to be at risk unless it is located in a very well regulated jurisdiction.
Decentralized exchanges (DEX), on the other hand, are immune to a lot of the problems of centralized exchanges and simply by being decentralized they have a plethora of ways to keep your money safer than ever before.
Withdrawals: Wait, What Are Those Again?
Once you start using a DEX, you will fully appreciate not having to jump through multiple hoops to withdraw your hard earned Bitcoin and other cryptocurrencies from a centralized exchange. Simply look at the recent example of a nightmare scenario that posted to Reddit.
A user on Reddit recently posted about his troubles with withdrawing his crypto from one of the many centralized exchanges out there. The exchange in question was HitBTC and it fired up the cryptocurrency community enough to get them to refund all his money. However, it did take 22 days of torture and a Reddit post that went viral to achieve.
This is something that no one should have to go through, and the great thing about decentralized exchanges is that you won't need to. Since there is no depositing money in a DEX, there is no hassle with withdrawing money either. Once both parties have agreed to a transaction and input their keys, the transfer of funds is instant.
Your Keys, Your Coins
Since a DEX is fully decentralized, and there is no third party service that is needed to hold your funds. Coinbase and Binance both hold your crypto so that you are able to trade with others, but with a DEX all the trades happen in a peer to peer environment. Eliminating the middle man in this way, DEXs offer you the best security you could ask for – yourself.
The onus is on you to keep your money safe, and you do not need to put your trust in a third party or a middle man to hold your funds for you. You also don't need to deposit funds to begin trading on a DEX. All you need is a wallet and an account with a DEX.
Since there is no central authority, you are the master of your funds at all times. Since you are the only one with the keys to your kingdom (or in this case, wallet), only you can authorize the funds to be let go.
The only way someone would b able to get your funds is if they get your keys or your password. While there is still a risk, the fact that you don't have to worry about being a small part of a large target is something that should not be taken for granted.
Central Point Of Failure: It Doesn't Exist With A DEX
The biggest problem with centralized exchanges is that there is always a single point of failure. Humans are fallible creatures and there are so many things that could go wrong that having one person having access to so much money is a big problem.
One tragic example of this happening is the death of QuadrigaCX founder and former CEO. He was the only person who held the keys to QuadrigaCX wallet and suddenly the entirety of the almost 200 million dollar QuadrigaCX Bitcoin wallet was lost to the world forever.
Now just imagine all the nodes, servers and other miscellaneous problems a centralized exchange could suffer. Staffers might be disgruntled, bribed or simply make a mistake. That mistake could cost you your crypto, and there would be almost nothing you could do about it.