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Is it me or "decentralised" almost always means "crippled"? The critical function that exchanges have is to allow people to buy and sell tokens. Decentralised

by lottin 4y ago

Is it me or "decentralised" almost always means "crippled"? The critical function that exchanges have is to allow people to buy and sell tokens. Decentralised exchanges can't do that. They only allow trading a token for another token.

solveit 4y ago
"Decentralized" doesn't mean crippled. "On-chain" does. At some point, you need to interact with the off-chain world (say, when you want US dollars and not tokenized US dollars), and that path to the physical world becomes a point of failure that can be controlled by mundane means such as uniformed people with guns. The crypto-utopian solution is to move everything on-chain. The pragmatist solution is centralized exchanges that more-or-less plays by the rules of wider society and is allowed by society to move stuff in and out of the blockchain.
ETH_start 4y ago
The tokens being traded on DEXes can be stablecoins. In a world where most usage of fiat is in the form of using stablecoins, or one where most financial institutions provide conversion of off-chain fiat to/from stablecoin fiat, most trading can happen on DEXes.
- lottin 4y ago
  That's right, in a hypothetical world where this limitation might not matter, it might not matter.
  - ETH_start 4y ago
    The point is that that hypothetical world becoming reality is plausible.
dcolkitt 4y ago
But we have stablecoins, like USDC, to act as on-chain dollars. The point is in a world of very robust decentralized exchanges, it's easy to buy tokens with dollars (or vice versa), by sending dollars from your bank account to Circle, who will send USDC to your wallet, which will then buy the token of your choice from a decentralized exchange. In this context Circle is still a centralized party that's necessary to interact with the off-chain banking world. But Circle has much less room for chicanery than a traditional centralized exchange. There's no opportunity to front-run, insider trade, liquidate your customers or anything else that OP brought up in the context of centralized exchanges, because all Circle is doing is filling the very simple task of converting 1.00 USD to 1.00 USDC and nothing else.
nly 4y ago
The primary purpose of a centralised order book is pool liquidity and enable price discovery. Interaction with the fiat system is fairly easy once you have 1 reputable party willing to issue a digital token with 1:1 redemption

by lottin 4y ago

solveit 4y ago

"Decentralized" doesn't mean crippled. "On-chain" does. At some point, you need to interact with the off-chain world (say, when you want US dollars and not tokenized US dollars), and that path to the physical world becomes a point of failure that can be controlled by mundane means such as uniformed people with guns. The crypto-utopian solution is to move everything on-chain. The pragmatist solution is centralized exchanges that more-or-less plays by the rules of wider society and is allowed by society to move stuff in and out of the blockchain.

ETH_start 4y ago

The tokens being traded on DEXes can be stablecoins. In a world where most usage of fiat is in the form of using stablecoins, or one where most financial institutions provide conversion of off-chain fiat to/from stablecoin fiat, most trading can happen on DEXes.

lottin 4y ago
That's right, in a hypothetical world where this limitation might not matter, it might not matter.
- ETH_start 4y ago
  The point is that that hypothetical world becoming reality is plausible.

dcolkitt 4y ago

But we have stablecoins, like USDC, to act as on-chain dollars. The point is in a world of very robust decentralized exchanges, it's easy to buy tokens with dollars (or vice versa), by sending dollars from your bank account to Circle, who will send USDC to your wallet, which will then buy the token of your choice from a decentralized exchange. In this context Circle is still a centralized party that's necessary to interact with the off-chain banking world. But Circle has much less room for chicanery than a traditional centralized exchange. There's no opportunity to front-run, insider trade, liquidate your customers or anything else that OP brought up in the context of centralized exchanges, because all Circle is doing is filling the very simple task of converting 1.00 USD to 1.00 USDC and nothing else.

nly 4y ago

The primary purpose of a centralised order book is pool liquidity and enable price discovery. Interaction with the fiat system is fairly easy once you have 1 reputable party willing to issue a digital token with 1:1 redemption