Decentralized Exchange Protocol or DEX is the decentralized & non-custodial liquidity mechanism, which supports trading within Cardano Ecosystem. This remove all complexity, intermediaries, as well as time-consuming processes from this equation that gives users complete freedom of trading without any fear of the censorship and losing control of the assets. This is the revolutionary DeFi exchange protocol that can revolutionize transactions as well as is based over Cardano network. Users have total ownership over the tokens and do not have to hand up the login credentials for orders to get logged, even though they are on the centralized exchange.
How does this work?
The blockchain network follows this principle of the proof-of-stake, and Cardano claims saving a little more energy just by adopting the sustainable path for mining protocol.
Unlike various other cryptocurrencies out there like Ethereum and Bitcoin that implement proof-of-work exchange protocol, Cardano is the low-energy consuming digital currency. What is more, this offers the currency holders an opportunity to validate each and every node in a Cardano blockchain.
Maybe Cardano plays really big when it is about transparency and active in accommodating their members in blockchain. The biggest benefit of this cryptocurrency is it goes very light on the energy consumption, which wins battle for the sustainability.
Advantages of the Decentralized Exchange Protocols
There’re some clear benefits to the decentralized exchanges. Firstly, they allow you stay in total control of the funds. Thus, there is no risk of exchange getting hacked and going insolvent. This will lead to the higher liquidity, since users will be keen to leave the orders open on an orderbook for longer while counterparty risk is completely gone.
- The users of the decentralized exchanges don’t have to transfer the assets to third party. Thus, there’s not any risk of the company and organization getting hacked, so users will be assured of higher safety from theft and hacking.
- Decentralized exchanges don’t need customers to fill know-your-customer forms, and offering complete privacy or anonymity to the users.
- They will create the global orderbooks. The decentralized exchanges are totally borderless and will serve anybody from any region.
Because of their nature of letting the P2P exchange of the cryptocurrencies, DEX prevent the market manipulation, and protecting the users from any fake trading or wash trading. This is referred as the round trip trading – and is one illegal practice where the investors buy or sell same financial instruments again and again.