Cryptocurrency Q&A
How does a decentralized exchange work?
How does a decentralized exchange work?
Riccardo
Thu Jul 11 2024
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6 answers
1209
Could you elaborate on the operational mechanisms of a decentralized exchange? I'm curious to understand how transactions are facilitated without a central authority. Specifically, how do buyers and sellers connect, what roles do smart contracts play, and how are orders matched and executed? I'm also interested in knowing the security measures and advantages that make decentralized exchanges appealing compared to traditional, centralized exchanges. Clarifying these points would greatly enhance my comprehension of the decentralized exchange ecosystem.
6 answers
alexander_jackson_athlete
Sat Jul 13 2024
Cryptocurrency swaps on decentralized exchanges occur in a unique manner, as the crypto asset is transferred directly to the user's wallet upon execution.
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Giulia
Sat Jul 13 2024
This direct transfer eliminates the involvement of intermediaries and ensures the asset remains in the user's possession throughout the transaction.
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Michele
Fri Jul 12 2024
In contrast, centralized exchanges operate in a fundamentally different manner. Here, customers' wallets are technically not owned by the customers themselves.
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KatanaSword
Fri Jul 12 2024
On centralized exchanges, the crypto assets are held in custodial wallets managed by the exchange, with the customer only having access to their balances through the exchange's platform.
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Chiara
Fri Jul 12 2024
This custodial model allows the exchange to offer additional services, such as trading facilitation and margin trading, but it also raises questions about the security and custody of customers' assets.
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