What is Decentralization?

Decentralized custody of assets

The biggest argument for decentralized exchanges (DEX) is not requiring users to trust exchange operators to custodize the users’ assets. The majority of crypto exchanges run on a centralized model (CEX) in which users send their funds to the exchange to hold in custody, so the user can trade on their platform. This centralized location for the custody of such large amounts of digital assets has always created a tempting target for attacks. The cry for DEXs comes from the repeated hacks against exchanges in which users have lost in excess of $1 billion.

Decentralized order matching

Order matching is when an exchange finds a buyer/seller willing to complete your order. Traders have an expectation that exchanges will fill their orders with the best price, quickly and in a fair manner (first come, first served). With centralized exchanges, we have no guarantee that this actually happens.

Decentralized settlement

Settlement is the delivery of assets upon payment. When does settlement happen in a CEX? It depends. Your trade might have executed and your exchange wallet will show an updated balance but that information is only within the realm of the CEX. The transfer of ownership as recorded on the actual blockchain doesn’t occur until you withdraw your assets from the CEX. So, on the surface, it may seem that your trade was settled because you’re able to turn around and trade them from your exchange wallet. The truth is, until you successfully withdraw from the CEX, those coins aren’t truly yours as there’s no record of it on the blockchain.



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OAX is a new, decentralized, digital asset ecosystem initiative run by the “The OAX Foundation Limited”. Go to http://www.oax.org to learn more.