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Decentralized exchanges allow users to exchange funds without ever entrusting their asset to a third party while other users are the ones who provide the liquid

by Tenoke 6y ago

Decentralized exchanges allow users to exchange funds without ever entrusting their asset to a third party while other users are the ones who provide the liquidity and take the profit from the fees, again without anyone having to trust anyone else beyond some publicly deployed code. I'd say that at least some of of the advantages cannot be recreated by a traditional service.

acdha 6y ago
It’s not that simple, however, since the inherent inefficiency means you have higher transaction costs to operate the network and since there’s no fraud protection you still need trusted third parties to broker any exchange where fraud is a possibility. As an expensive way to transfer money to your drinking buddy it works but if you’re buying or selling with strangers those third parties are necessary and still need to be paid. Similarly, you aren’t getting rid of trust: power recentralizes in a handful of users who control the most mining power and the developers (Ethereum classic comes to mind). Very few people have the time or skills to audit that constantly so they either end up trusting strangers or relying on a trusted third-party who ends up being a bank in all but name.
- Tenoke 6y ago
  > since there’s no fraud protection you still need trusted third parties to broker any exchange where fraud is a possibility. The whole point of DEXes is that you dont need that. >Similarly, you aren’t getting rid of trust: power recentralizes in a handful of users who control the most mining power and the developers Maybe in ETH's case but highly decentralized non-mining networks already exist. Cardano for example is Proof of Stake and has rules in place where the more a pool has the less it earns so centralization is disincentivized.
  - acdha 6y ago
    > The whole point of DEXes is that you dont need that. Okay, so if I sell you a new laptop and you receive a box with an old one, how do you get your money back? Do you have the option of reporting fraud and getting your money back even though I gave the promised good?
    - Tenoke 6y ago
      DEXs solve those problems in a Forex-type environment, not all environments.
      - acdha 6y ago
        In other words, they solve it in environments where this is already a solved problem
xirbeosbwo1234 6y ago
So cryptocurrency is useful because it lets you trade cryptocurrency. Got it.

by Tenoke 6y ago

acdha 6y ago

It’s not that simple, however, since the inherent inefficiency means you have higher transaction costs to operate the network and since there’s no fraud protection you still need trusted third parties to broker any exchange where fraud is a possibility. As an expensive way to transfer money to your drinking buddy it works but if you’re buying or selling with strangers those third parties are necessary and still need to be paid. Similarly, you aren’t getting rid of trust: power recentralizes in a handful of users who control the most mining power and the developers (Ethereum classic comes to mind). Very few people have the time or skills to audit that constantly so they either end up trusting strangers or relying on a trusted third-party who ends up being a bank in all but name.

Tenoke 6y ago
> since there’s no fraud protection you still need trusted third parties to broker any exchange where fraud is a possibility. The whole point of DEXes is that you dont need that. >Similarly, you aren’t getting rid of trust: power recentralizes in a handful of users who control the most mining power and the developers Maybe in ETH's case but highly decentralized non-mining networks already exist. Cardano for example is Proof of Stake and has rules in place where the more a pool has the less it earns so centralization is disincentivized.
- acdha 6y ago
  > The whole point of DEXes is that you dont need that. Okay, so if I sell you a new laptop and you receive a box with an old one, how do you get your money back? Do you have the option of reporting fraud and getting your money back even though I gave the promised good?
  - Tenoke 6y ago
    DEXs solve those problems in a Forex-type environment, not all environments.
    - acdha 6y ago
      In other words, they solve it in environments where this is already a solved problem

xirbeosbwo1234 6y ago

So cryptocurrency is useful because it lets you trade cryptocurrency. Got it.