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I’m not even talking about defi here. Let’s say I just want to trade ETH into BTC or some random coin. I need to trust some website to get that done and be the

I’m not even talking about defi here. Let’s say I just want to trade ETH into BTC or some random coin. I need to trust some website to get that done and be the decentralized exchange. Sure 1000s if websites claim to be decentralized exchanges but how as a user are you supposed to know they are working as they describe themselves? Simply you can’t without an insane amount of digging, so you have to trust a centralized exchange that is regulated by the government. Otherwise if the exchanges cheat you, steal from you, freeze your coins, go under, you just have zero recourse.

mudrockbestgirl 4y ago
> I need to trust some website to get that done and be the decentralized exchange You don't. You don't need to interact with any websites to make transactions. It's on-chain. You can always run a (light, non-archival) node to ensure the transaction does exactly what you expect it to (before submitting it) do without ever going to a website. You're right that if you trust absolutely nobody, not even chain explorers, you need to put in more work, do some digging and understand how the system works. You're exchanging usability for security/trust. The point is that you have the option to do that. If you are paranoid and don't trust centralized entities you don't have to. Decentralized exchanges can't cheat you, steal from you, freeze your coins, or go under. It's technically impossible because they don't have custody of your coins at all.
- smaryjerry 4y ago
  I’m taking about working between chains, not staying on a chain or other cryptos built on the same chain. Someone is building a decentralized exchange, the interaction or adding the next new crypto currency to that exchange and choosing how it is setting the price of the exchange or possibly relaying on other centralized exchanges - typically to set the exchange rate you would rely on the bid ask spread, but if it doesn’t look at other exchanges someone can just buy from one exchange where it’s cheaper and sell on the other. Have you seen office space? The movie where they make the program steel fractions of a penny in each transaction? This is doable in the setting of the prices and fees and the way rewards are set for liquidity, benefiting the person who created them - so who knows how these places work, no one except programmers, and maybe they gain trust over time from others that never had a problem with them before. But when something does goes wrong, who will foot the bill and be held accountable. That’s why centralized exchanges are a must because if something goes wrong you call the police.
  - TimJRobinson 4y ago
    Decentralized exchanges don't use an order book, they are Automatic Market Makers (AMM's) that use a bonding curve instead. They don't rely on centralized exchanges at all. There is a lot of arbitragers on all chains equalizing prices between them all. What you've described with office space is known as MEV in the DeFi world. All the exchanges are completely open source, you can learn how they work if you put the time into it. I recommend the Balancer whitepaper. If you can figure out how they can go wrong feel free to explain. But it seems you don't actually understand them yet and are just making assumptions. Your belief that we need centralized exchanges is just an opinion, and it's wrong, which you'll discover as you dive deeper into seeing how they work.

mudrockbestgirl 4y ago

> I need to trust some website to get that done and be the decentralized exchange You don't. You don't need to interact with any websites to make transactions. It's on-chain. You can always run a (light, non-archival) node to ensure the transaction does exactly what you expect it to (before submitting it) do without ever going to a website. You're right that if you trust absolutely nobody, not even chain explorers, you need to put in more work, do some digging and understand how the system works. You're exchanging usability for security/trust. The point is that you have the option to do that. If you are paranoid and don't trust centralized entities you don't have to. Decentralized exchanges can't cheat you, steal from you, freeze your coins, or go under. It's technically impossible because they don't have custody of your coins at all.

smaryjerry 4y ago
I’m taking about working between chains, not staying on a chain or other cryptos built on the same chain. Someone is building a decentralized exchange, the interaction or adding the next new crypto currency to that exchange and choosing how it is setting the price of the exchange or possibly relaying on other centralized exchanges - typically to set the exchange rate you would rely on the bid ask spread, but if it doesn’t look at other exchanges someone can just buy from one exchange where it’s cheaper and sell on the other. Have you seen office space? The movie where they make the program steel fractions of a penny in each transaction? This is doable in the setting of the prices and fees and the way rewards are set for liquidity, benefiting the person who created them - so who knows how these places work, no one except programmers, and maybe they gain trust over time from others that never had a problem with them before. But when something does goes wrong, who will foot the bill and be held accountable. That’s why centralized exchanges are a must because if something goes wrong you call the police.
- TimJRobinson 4y ago
  Decentralized exchanges don't use an order book, they are Automatic Market Makers (AMM's) that use a bonding curve instead. They don't rely on centralized exchanges at all. There is a lot of arbitragers on all chains equalizing prices between them all. What you've described with office space is known as MEV in the DeFi world. All the exchanges are completely open source, you can learn how they work if you put the time into it. I recommend the Balancer whitepaper. If you can figure out how they can go wrong feel free to explain. But it seems you don't actually understand them yet and are just making assumptions. Your belief that we need centralized exchanges is just an opinion, and it's wrong, which you'll discover as you dive deeper into seeing how they work.