There are myths and realities around DEXs that are sometimes overlooked by users.
One of the most influential factors for the growth of the industry is the security of DEXs. These types of exchanges simplify trading by not having a third party involved. That is, the trade is carried out between interested parties and there is no control of the funds by the exchange.
The fundamental spearhead of DEXs is the control of funds. Essentially, they were born as a solution to not wanting our funds to be managed by third parties (exchanges) either out of mistrust or fear of large losses.
The wonders of security in DEXs also implicitly expose them to risks that could make any user lose thousands of dollars, let’s start by making a list of the myths on which users rely to support DEXs.
DEX Security: Myths
The biggest dilemma around DEXs is found in the management of funds and anonymity. On occasions, the community tends to favor these points. However, it is a painful reality that the custody of cryptocurrencies, at times, can be a point against it.
Security on DEXs only eliminates one weak point, having the users’ money in the wallet of a centralized exchange. Otherwise, funds continue to move from one place to another and self-custody is a complex issue that still has flaws. There are still risks associated with the use of DEXs, such as hacks to the owner’s devices, scams, or even errors when making transfers between wallets or peers.
Anonymity is a big “but” when choosing this type of exchanges. While it is true that they do not usually request KYC procedures to operate, the wallet addresses continue to be visible on the blockchain. This is due to the very nature of the ecosystem, so although the user’s identity is not associated with each of the transactions as if it were a bank, transactions will still be traceable.
Considering that the security in DEXs is “greater”, one of the biggest myths is that only experienced users benefit. However, the truth is that any user can benefit by understanding the risks inherent in this type of exchange. At first, these exchanges were complex and very technical, but nowadays platforms like UniSwap have simplified and standardized operations.
DEX: An Inescapable Truth
Control is the greatest advantage of DEXs, the total management of funds. This allows the user to decide what to do with them and how to safeguard them. On the part of the exchanges, this reduces the risks of theft or fraud, leaving only the user as the weak link in the chain.
Another factor to consider is the speed of each operation, which, since they are not transmitted through an exchange, have lower costs and are much faster.
However, one of the biggest disadvantages and realities is that centralization attracts greater capital, which translates into greater liquidity to operate, which can restrict operations or cause delays in transactions at certain times.
Based on the above, it can be stated that DEXs are a fundamental factor in the industry. These are closer to the original concept of cryptocurrencies. Self-custody and management of funds guarantees users the freedom to operate as much as they want with them.
Despite this, there are also factors that are not as striking as possible theft or previously, its complexity to operate, something that has been changing over the last two years. However, DEXs will increasingly be a critical factor where peer-to-peer trading strengthens user communities.
By Audy Castaneda
