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What is a Decentralized Exchange?

  • Eric Eissler

    Remaining anonymous and still using an exchange is possible with a DEX, but there are downfalls

What is a Decentralized Exchange?
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In an era of decentralization made possible with the advent of Blockchain technology, we are seeing many everyday things that we use start to shift from centralized to decentralized forms. Bitcoin is the best example of this as it is a currency that does not have a central issuer, instead it is controlled by all the millions of miner nodes on the network. There is no central authority figure who is controlling it all. So how can decentralization translate to an exchange? Sure there are crypto exchanges, such as Coinbase, Gemini, Bittrex, etc., but these exchanges are still centralized.

The decentralized exchange

A decentralized exchange (DEX) is an exchange market that does not rely on a third party service to hold the customer's funds, such as Coinbase. Instead, trades occur directly between users in a p2p network through an automated process. This system is created by making proxy tokens, which are crypto assets that represent a certain fiat or cryptocurrency. Another way to do this is to use assets, which can represent shares in a company for example, or through a decentralized multi-signature escrow system, among other solutions that are currently in development.

This system contrasts with the current centralized model in which users deposit their funds and the exchange issues an IOU that can be freely traded on the platform. When a user asks to withdraw his funds, these are converted back into the cryptocurrency they represent and sent to their owner.

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Operational DEXs to check out

Key differences between centralized and decentralized exchanges

Anonymity

Decentralized cryptocurrency exchange platforms are all about anonymity. Consider them to be the distributed Blockchain-equivalent of centralized exchanges.

Government regulations that have entered into force has led to the adherence to strict identification laws. It is difficult to trade anonymously on a centralized cryptocurrency exchange platform. Just recently Coinbase forced all its users to add addresses, social security numbers and identity documents, if customers want to continue using the exchange’s services. Who knows what kind of government reporting Coinbase will be forced to do come tax time in early 2019.

Authentication

There is no need to rely on a third-party intermediary for user authentication. With smart contracts in place and a number of Blockchain protocol implementations, the entire system is built to provide trust-less authentication and authorization of crypto exchange transactions. The system is designed to run on it with the smart contacts enforcing the policy of the exchange and ensuring that users can’t double spend and that they are getting promised payments. The third-party authenticator is removed from the equation.

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Benefits of decentralized cryptocurrency exchanges

Funds controlled by users

A decentralized exchange is owned and controlled by all the participants so there is no central authority that has custody of deposits. The control of the money is always in the hands of the customer since the network uses a p2p network. Smart contracts regulate and ensure the proper execution of trades and payments, which occur between users in the network. Additionally, users control their private keys as well as their funds at all times in a decentralized exchange. There are no issues between the exchange authority and the user so some issue, such as lost funds surface.

Transactions: quicker, cheaper

Potential to provide a platform that facilitates faster, cheaper and more cost-effective crypto exchange/trading transactions than centralized exchanges. The removal of the third-party authenticator drastically reduces fees and lag time before buy/sell orders are processed.

Hacks and server downtime mitigated

A decentralized exchange is far less susceptible to attacks than centralized exchanges. There have been many high-profile hacks on major centralized crypto exchange platforms that demonstrate just how susceptible centralized exchanges are to cyber attacks. decentralized exchanges have no single point of entry, akin to a Blockchain. As such, a hacker will need to compromise more than half of the network to be able to commandeer the system. If only one node is taken offline, the entire network is not compromised.

Hardware wallets are easily integrated

Many decentralized exchanges offer smooth integration with hardware wallets, which ensures a much safer transaction. Users can send tokens directly from their hardware wallets to smart contracts on many decentralized exchanges. In centralized exchanges, conversely, this is not possible because users must manually enter private keys to move coins from hardware wallets to centralized exchanges. This opens the transaction to phishing as well as keylogging and stealing keys and passwords.

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Drawbacks of decentralized cryptocurrency exchanges

While it sounds like a decentralized exchange is the panacea for all the ills of the centralized exchanges, we are not there quite yet as these exchanges are still very green and not geared towards a novice user.

Advanced users

Centralized exchanges have easy to understand tabs and buttons on their websites, whereas many decentralized Bitcoin exchanges have a confusing exchange dashboard that takes some getting used to. These are not for the beginner, and since many people in the cryptosphere are new users, they are going to be left out, until the technology simplifies.

Basic trading only

As of now most decentralized exchanges only support the basic cryptocurrency exchange functions: buy and sell. Many of the advanced trading features such as margin trading, stop- loss trading, etc. is one of the reasons why decentralized exchanges have not achieved much popularity in the larger cryptocurrency trading environment. However, as with any technology, we can anticipate that these features will be arriving in due course.

No crypto/fiat trades

The DEXs out there do not have the ability to trade fiat at the moment which requires there to be crypto in the bank already, or the possibility to move it through another centralized exchange, which kind of defeats the purpose of using a DEX if you must pass through a centralized exchange first.

Low liquidity

Since exchanges are not so popular with the masses, that means they have low volumes and low liquidity. This can be a big problem if there is massive sell order that is executed and all the funds dry up. Users are going to be stuck trying to make withdraws until some buy orders come across the transom.  

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Three benefits to decentralized exchanges

  • The user controls his/her funds

  • The user remains anonymous

  • Hacks are mitigated due to decentralized nature, an exchange cannot go down

Three negatives to centralized exchanges

  • The user does not control his/her funds, the exchange does

  • The user cannot remain anonymous, they must submit to providing ID

  • Hack and server downtime can bring down the entire exchange

The future is here!

While DEXs offer potential, they are in the beginning stages and won’t be a major competition for traditional exchanges just yet. However, are more trading tools and feature are added along with the ability to buy and sell fiat, then watch out! Traditional exchanges are going to have some major competition to contend with.  

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Best 10 Bitcoin Movies and Cryptocurrency Documentaries to Watch in 2019

  • Denys Serhiichuk

    Nowadays, one can get information about Bitcoin and Blockchain from everywhere. That could be forums, social media, and even books. This trend has become so popular that even directors have started to shoot movies about it. We selected the 10 best films about the main cryptocurrency so you can find that one which you would like the best.  

Best 10 Bitcoin Movies and Cryptocurrency Documentaries to Watch in 2019
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With the beginning of cryptocurrency hype, documentary filmmakers are also interested in the blockchain and the opportunities it provides.

However, few people know that there are documentaries that shed a realistic light on “digital gold” and describe their positive and negative sides without embellishment. We picked the top 10 films that describe the history of Bitcoin.

Alt: Bitcoin movie

Banking on Bitcoin

This movie will give you the possibility to know better the earliest users of Bitcoin technology. It discusses the features of revolutionary cryptocurrency technology, and its potential and ability to change people's lives. Erik Voorhees, Gavin Andresen, and Charlie Shrem took part in the creation of this documentary.

The film deeply analyzes the successes and falls experienced by the early users of the currency since Bitcoin was released in 2008. Throughout the film, its creators tried to find a so-called harmony between regulation and innovation. The movie reveals various points of view on topics related to Bitcoin, as well as talks about how technology pioneers contributed to the creation of blockchain technology. If you are passionate about innovation and legal regulation, you should definitely watch this film.

Bitcoin Gospel

Bitcoin Gospel” logo

It is a Dutch documentary that gives answers to questions about what Bitcoin is, how to pay with it and why it has become so popular. The film is focused on the speeches of crypto-enthusiast Roger Ver, who is called Bitcoin Jesus. He explains in detail how this currency operates. The movie mainly revolves around Ver, who has devoted his life to the promotion of the use of Bitcoin. It also analyzes the mining industry in China. Other prominent Bitcoin-angels, such as Andreas Antonopoulos, also appear in the film.

Furthermore, the film focuses on the performance of Roger Ver in Japan, a country that is supposedly drawn to Bitcoin much more than others. If you would like to master your knowledge of Bitcoin, this film is clearly for you.

Magic Money

Magic money” logo

This film was prepared specifically to answer lots of issues about Bitcoin that exist in the public space, including what Bitcoin is and what its consequences for society are. The creation and further development of the first form of digital currency is described here. Bitcoin is a currency that is not currently controlled by modern monetary institutions, but by people using it. “Magic Money” analyzes the origin of the currency and its key functions. It also addresses the point of whether this currency is really the solution for the whole society. The movie seriously investigates the mysterious origin of the revolutionary currency and what outcomes it may have for the future of our world.

Unlike other similar films, it does not concern the history of cryptocurrency but rather its practical use. During the film, businessmen from different countries of the world express their opinions about Bitcoin as the main payment instrument.

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Bitcoin: The End of Money as We Know it

Bitcoin: The End of Money as We Know it” logo

The film was directed by Torsten Hoffmann and appeared in 2015.

It explains the following features of digital assets:

  • Peculiarities of virtual currency

  • Intricacies of commerce and trade

  • Reasons why Bitcoin can be useful

This film traces the evolution of money from the ancient times to Wall Street’s commercial centers.

It is mentioned how Bitcoin is in many ways different from any other currency created in the history of mankind, and how it could blow up the minds of most people since the currency is decentralized and reliable from the point of view that it does not have official intermediaries and every user has the ability to independently monitor transactions within the network. Bitcoin challenges traditional banking and monetary systems. The producer of the film wanted to stress how much the new currency would violate the usual monetary systems we are all used to.

The Rise and Rise of Bitcoin

The Rise and Rise of Bitcoin” logo

Filmed in 2014, it is one of the first documentaries about Bitcoin and other coins. In this film, the author talks about how he has become interested in BTC and how, through participation in the Bitcoin community, he learned about the global influence of this breakthrough technology on our world.

The essence of the picture is an optimistic view of virtual money. Here we consider the history and features of cryptocurrency. Special attention is paid to the personality of Satoshi Nakamoto, who managed to create the unique money that grabbed the attention of the whole world. The film tells about important events in the Bitcoin system, offers a more detailed overview of the virtual currency and its features. During the filming, interviews were given by many famous people, including the Winklevoss brothers, Vitalik Buterin and others. According to many experts, this film received the greatest publicity in the cryptocurrency environment and has many good reviews.

“The Rise and Rise of Bitcoin” is a film that documents the unpredictable journey of Bitcoin. It covers all Bitcoin-related events that have ever led media headlines.

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The Bitcoin Experiment

The Bitcoin Experiment” logo

The film was released in 2016. This is a social test about the legal points of Bitcoin as a digital currency. The filmmakers went to Scandinavia, which they showed as an example of how applicable digital currency is in a person’s life. The film is a documentation of a social experiment. The authors of the film examined the question of how people are ready to use cryptocurrencies in everyday life.

 

The movie captures moments of how cryptocurrency creates freedom from pre-established financial institutions, even for the average citizen of the country. It also demonstrates the benefits that consumers can derive from the use of revolutionary digital currency.

Life on Bitcoin

Life on Bitcoin” logo

From the name of the film alone, one can already draw conclusions about its features. The documentary movie tells about the life of young spouses who give themselves the task of living for three months using only the cryptocurrency. The main intrigue is that they started the experiment immediately after their wedding.

The film consists of two parts that are related. The first tells about Bitcoin, the problems of using it, its features, and other aspects. In the second part, the young couple films their attempts to live on the cryptocurrency.

“Life on Bitcoin” clearly showed how rarely cryptocurrency is found outside of large cities and how hard it is to convince vendors to accept Bitcoins as payment.

I am Satoshi

I am Satoshi

This is a 53-minute documentary film. It conducts a detailed study of Bitcoin from the position of a participant in the global economic system. The film raises the question of whether the technology behind Bitcoin cryptocurrency can upgrade the modern world. In 2014, this tape was awarded in the nomination for “The most creative cinema.”

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The Bitcoin Story

The plot of this film is developing rapidly. It contains all the secrets associated with the emergence of Bitcoin, and also describes the fundamentals of technology, the political background and the ability of Bitcoin to transform the financial sector. In addition, the directors included the points of view different venture capitalists have on cryptocurrencies.

The Bitcoin Phenomenon

The Bitcoin Phenomenon

The film tells the story of how the main cryptocurrency Bitcoin was created. Let Satoshi Nakamoto remain anonymous, but the personalities of the people with whom he made his creation are well known. One of them, Gavin Andresen, talks about his experience of communication with Nakamoto. He explains why the idea of ​​creating Bitcoin is ingenious, and how it fundamentally differs from earlier cryptocurrency projects that remained unfulfilled.

The movie shows the importance of BTC as a means of payment, as well as the uniqueness of the Bitcoin network from a technical point of view. In addition, the film tells the stories of Bitcoin-evangelicals Erik Voorhees and Trace Mayer.

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