Crypto Word of the Week: DEX
Let me teach you a new phrase today. Say it with me: "Not your keys, not your coin". Now repeat this mantra while I explain what DEX means...
Decentralized Exchange (DEX)
When you went online to buy cryptocurrency for the first time, like Bitcoin or Ethereum, you most likely went to a Crypto Exchange (CEX) like Coinbase, Binance, or Kraken to make that purchase. After you jump through a lot of hoops to verify you as YOU through KYC (Know Your Customer) and finally connect your bank account, there are a lot useful things you can do on these exchanges; things like buying, selling, storing, and trading your crypto assets. However, your crypto assets on these exchanges are not in your control!
"You cannot do what you want with your own crypto. The exchange holds a vital piece of data: your Private Key. Remember the famous crypto saying Not your key, not your coins? Since the exchange holds your key, they own your crypto and have control over them." (https://www.ledger.com/academy/crypto/what-is-a-dex-decentralized-exchanges-explained)
In the security world, this is referred to as "no positive control". Which means that, although the exchange recognizes your ownership of said assets, they hold control and access to them--they essentially own them. In my humble opinion, this is NO BUENO! But fortunately, this is where decentralized exchanges (DEX) come into play!
Not A Person, Place or Thing...But An Action
Now, a true DEX isn't really a market"PLACE" for exchange at all!
"When I use free software and an open blockchain network to trade one token for another directly with another trader, then I am engaged in decentralized exchange — an action, just as I might engage in running or paying. We have this habit of saying that a DEX is a thing rather than an action because we are stuck in a centralized services frame of mind. Coinbase is a thing, a business, a corporation. But if the trade is actually happening peer-to-peer, then the “DEX” being “used” is just software and an internet connection. In that case, there isn’t a thing called a DEX. There are no DEXs; there is just decentralized exchange, the action, taking place using software tools, open blockchains, and the internet." (https://www.coincenter.org/theres-no-such-thing-as-a-decentralized-exchange/)
WOW! That changes things, Right?! I love this "no-middle-man" bit! The idea that I can have peer-2-peer transactions without a financial custodian lurking over my shadow is...to me...freedom! But wait a minute! How do I make this happen? I don't have any software or equipment, let alone the knowledge base to pull off something like this. So what? I'm back to being at the mercy of the CEX? No, my Friend! Enter DEX Platforms.
It's a DEX Thing
There are things called DEX Platforms that allow the action of DEXing to take place--peer-2-peer. Just like CEX, you create accounts, buy, sell, trade, etc., but unlike your typical CEX, they DO NOT hold your private key, because you manage them externally with a connected digital or hardware wallet. This means that YOU maintain positive control of your crypto assets. They simply provide a marketplace for DEXing to occur. Some advantages of DEX include:
- Custody - you control your private keys
- Diversity - access to many more altcoins
- Trustless Transactions - the use of smart contracts
- Lower Fees - using self-executed smart contracts means lower gas, even with fluctuating networks
- Privacy - no private key disclosure because wallets are held externally
There many, many DEX platforms like IDEX, UniSwap, 1-Inch, and TronTrade. You can view a list of DEX here (https://dappgrid.com/decentralized-exchanges/). I use one called ShapeShift, which I really like.
With any of these DEX you can connect your digital and hardware wallets to buy, sell, and trade your crypto coins and tokens, all the while keeping positive control of your assets and keys. FREEDOM! This is all part of the Journey of becoming bankless.
Become your own bank!
The Pied Piper
Live above the sun!
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