Reasons Why Decentralized Exchanges Aren’t More Popular

Reasons Why Decentralized Exchanges Aren’t More Popular

Decentralized exchanges represent everything that cryptocurrencies stand for. Not only are they more secure, but they have far more effective application than centralized counterparts. So, why are they catching on as quickly? There are various reasons for this:

Centralized Exchanges Were First on Scene

While the concept of decentralized exchanges have long been in the works, centralized exchanges were first on scene.

And in the tech sector, sometimes, first on scene companies typically corner huge market shares particularly when they provide a sorely needed service that works.

While many people don’t like the lack of anonymity on centralized exchanges, most just weigh the risks and decide that the risk of no anonymity is worth the pecuniary reward.

Decentralized Exchanges Aren’t as User Friendly

Most centralized exchanges are built with users in mind. Of course there’s always the more technical features, but users can easily and effortlessly use these exchanges owing to their ease of use.

This is something that was lacking in many decentralized exchanges until some developers started building user friendly ones. But, by that time, the adoption of the centralized exchanges was in full swing and folks were already using them.

Most traders are pretty content with the user friendly features provided in centralized exchanges and would rather not go through the hassle of learning how to use a new platform.

Learning Curve Requirements and Technical Hurdles

Decentralized exchanges were highly technical in nature, and required users who were tech savvy to operate them. This alone, was a turn off for the average user who didn’t have the time to learn a new coding skill or navigate the exchange.

Centralized exchanges already provide them with everything they wanted on a platter of gold, so why would they even bother with DEXs. The learning curve required as well as the technical hurdles involved resulted in many abandoning the use of decentralized exchanges, even though they offered better security, anonymity and safety.

Higher Risk of Direct P2P Transfers

Decentralized exchanges work on the basis of peer to peer transactions. So, instead of having your funds or cryptos in an escrow like account that’s provided by centralized exchanges, you have to trust that the person you’re exchanging your crypto with, will send the equivalent back to you.

It was just too much work and uncertainty. People just want trustless system where they can be sure that when they execute their trades, they’re getting decent value for money and will have their cryptos in their wallets instantly.

Why are DEXs Better than Centralized Exchanges?

In spite of all of the aforementioned benefits of centralized exchanges, the reality is that Decentralized exchanges provide far better features and security. Here’s how:

No Single Points of Failure

Centralized exchanges are typically hosted on centralized servers. This is where all the data are gathered, hosted and stored. This leaves them prone to hack attacks and other forms of exploitation.

These exhibit the vulnerabilities that are often found in centralized systems. Storing data on a centralized group of servers leaves these exchanges open to risks and drastically increases their vulnerabilities.

This is where decentralized exchanges outperform these centralized exchanges. In DEXs, data are typically spread over thousands of nodes that are self-sufficient and secure. So, even if there’s a breach, the damage is localized or limited to one node as against the entire network in centralized systems.

Zero Risk of Bans and Penalties

Centralized exchanges can issue bans, block users and institute penalties against supposedly erring users. This has led to a lot of issues for these exchanges in the past. With decentralized exchanges, this is basically non-existent.

That’s because data isn’t centralized and unencrypted. So, they can’t easily access user data, not to talk of issuing blocks or bans to anyone. And because the platform itself is incredibly secure, users can rest easy, knowing their data is secure.

Huge Anonymity and Decentralization

This is the bedrock of decentralized exchanges. Most, if not all, centralized exchanges require you to submit personal information and documents to unlock the full features of the platform.

Not so with decentralized exchanges. You can trade huge volume on these platforms without any risk of having your accounts limited just because you didn’t submit your personal details for verification or skipped the KYC process.

Highly Secure

By their very nature, decentralized exchanges are highly secure. This makes sense seeing as their servers aren’t located in one or a few places. The entire network is often spread across thousands of nodes located across the world.

Apart from that, all data stored on these nodes are encrypted and secured thanks to the blockchain. So, you never have to worry about any corruption, government bans, regulation, data breaches, hacks, downtimes or losses. Your files, documents and data will always be secure and inaccessible to third parties.

Reputation Based P2P Transfers

Peer to peer transfers is the life force of decentralized exchanges. As a result, these exchanges have come up with a highly valuable “currency” in the form of reputation.

This backbone has been responsible for the increased adoption of peer to peer transfers on these platform. Sellers and buyers don’t want their reputations messed up, so they do their very best to keep their reputations solid and unblemished.

The review-based systems that are in place are designed to keep people honest and sincere, and increase trust ratio among participants.


So what can DEXs do to gain increased market share?

For starters, they can create platforms with easier ux –some are already doing this, eliminate technical hurdles so it’s easier for people to use, incentivize the public, promote the exchanges, deploy an array of easy to use tools and resolve scalability issues.

Once all these are handled, it shouldn’t be so hard to experience massive adoption of the platforms.

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