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Understanding Distributed Exchange Network

Before we go to the core topic of this article, let’s define what a decentralized market is first. It’s a structure of a market that involves a variety of technical devices in a network. These devices allow investors to build a marketplace without a centralized location. The technology in a decentralized market provides access to investors in various bid and/or ask price. This enables them to deal with their peers directly on investors-to-investors manner instead of a third party exchange network.

In the heart of a decentralized market is the decentralized exchange where all exchanges of assets, including foreign exchange and virtual currencies, take place. There are two essential exchange models. One of which is the currency-centric model where exchanges are created on a specific currency blockchain platforms like how Ethereum works. The second model is a newer one, which is the currency-neutral exchange. The design of this exchange model doesn’t adhere to any specific currency ecosystem and allows any type of virtual currency to connect.

The latter model is how such a market should be. A decentralized exchange market should not be pegged to a specific national currency. It should allow any exchange of anything for anything, and that includes virtual currencies. The systems here enable users to trade currencies without an underlying coin, which in essence, acts as some kind of “middleman” since it’s peer-to-peer. This is the most beneficial aspect of a decentralized exchange since you hold your funds in your wallet and not by a third party. Furthermore, you are not required to disclose any of your personal information to anyone, which keeps your privacy safe.

As the philosophy of decentralization is the resistance to any censorship, decentralized exchanges mean that there is no governing authority that could force their regulations. There is no possibility of any bans on currency and/or the exchange itself. This is an important aspect of a decentralized exchange, especially that cryptocurrency trading, is being suppressed by many countries. China and India, for example, have banned cryptocurrency exchanges. Countries such as Saudi Arabia, Russia, Mexico, and Brazil, have restricted cryptocurrencies.

If there are no decentralized exchanges, people will not have the democracy in the control of their currencies. All trading and investments on cryptocurrencies will be subject to the government’s control, who can ban currencies, or track and tax the users. Another great benefit of a decentralized distributed exchange is the increased layer of security. Each user has the power to control and protect his own funds, which means that there can never be any main point for an attack.

Clearly, the decentralized distributed exchange is, and will always be the better option for trading and investment. The very fact that there is no third party involved in the whole process makes it less costly, more secure, and more importantly, more democratic. Without the centralization in the functions of exchanges, there will be no taxation and regulation authorities to interfere. In a nutshell, you are the master of your own funds, and that's how it should always be.