DEXs and DAPPs are key in the features of the decentralized age so it’s the only key that we help simplify them for you. Whether you’re new to the decentralized era of technology or you’re a regular, we’re here to guide you through it.
What is a DEX
A DEX stands for decentralized exchange and this means that you’re allowed to trade your crypto coins and tokens in a decentralized way with the absence of a centralized authority.
Instead, they allow you to execute transactions with the use of Smart Contracts. These are self-executable contracts that do what regular contracts do, which is, letting people get into an agreement together. This is basically a legal agreement in code form. With Smart contracts, If there is a consensus of the parties involved the smart contract will run smoothly. But if one party has anterior motives then the smart contract won’t run, thereby protecting the assets of the legal party. Examples of DEXs are Uniswap, Sushiswap, Pancakeswap, etc.
It is crucial to note that DEXs only allow you to exchange or swap cryptocurrencies that are on the same blockchain. It doesn’t allow inter-blockchain exchanges, for now.
Benefits of a Decentralized exchange
In a DEX, there are no centralized authorities to put your trust in. You can only trust the smart contract.
Open source code is more trustworthy because you can take a look at the code yourself and if you’re a top-class developer, then you’re able to look at it, work out some bugs if there’re any, and give it your stamp approval.
- Transaction Speed
The transaction speed or DEXs far surpasses that of centralized exchanges. Allowing you to transfer tokens and coins at light speed and fees are little compared to that centralized exchanges. With exchanges recording record time speed, it’s an added advantage to you depending on your urgency.
Downsides to DEXs
- No customer support.
When you have an issue with the network, you can maybe air it on the Twitter account of your DEX. These networks have no customer care or support for the system. Also, sometimes they have community forums but these are comprised of other people who use the product and they help out because they may have experienced what you’re experiencing. You got to be careful what you do a DEX because if you have an issue, you’re on your own.
- Hot storage device
In DEX you must only use a hot storage device to store your coins or tokens. This means that your wallet must be connected to the internet. As you know for a large amount of crypto, it’s always safer to store it in a cold storage device because that way ut can never be accessed by hacks. But DEXs don’t give that option to users for now.
- Low liquidity
This simply means that there is an ever occurring volatility in the price of cryptocurrency thereby causing spikes in prices and the inability to convert crypto to fiat cash. This is no good for a trader who wishes to buy, sell or exit a current position, thereby making it hard to complete transactions on the network.
This might have been on the positive side but this is a double-sided sword. Because the underlying code of a DEX is open to everyone, it’s easy for nefarious individuals to take interest in the code as well. if a hacker wishes to monitor the code and experiment with it by finding a bug. This person can take advantage of the network.
What is a DApp
A dApp is a decentralized application. The way your mobile phone has apps such as Facebook, Twitter, and TikTokthat report to the company centralized servers, dApps are very similar. The only difference is in a dApp, you report to the blockchain. You simply interact with the blockchain with the decentralized application.
Benefits of dApps
- Smart Contracts
DApps can only be built on smart contract networks. These simple codes of self-executable contracts are created on the network to reduce human interference. This means that smart contracts act as third parties to contractual agreements between two parties.
As you might know, open-source means that anyone anywhere can view your code and even skilled developers can help discover bugs and stuff like that. This also builds trust because of the fact that your product is out in the open for everyone to see. In contrast to centralized applications, the underlying code of how the product works or how they get our data and leverage it for their gains.
DApps are beyond censorship which means that they do not answer to anyone, any government agency, or any other organization. Also, users cannot be blocked or restricted
- They will never go offline
Companies like Facebook, Instagram, and YouTube have been shut down in the past. For whatever reason, be it a coding error or government intervention, centralized platforms experience this from time to time. But this would be impossible for dApps. For a company to run on the blockchain, it means that they run by millions of computers around the world, and essentially it is impossible for them to all be shut off or seize activity.
As these are ever-growing networks, there is still massive room for innovation and they have enough time to get there. For the dApp space, we’ve seen different forms such as AAVE – borrowing and lending dApp –, marketplace dApps, Game dApps such as Scorefam, educational dApps, and a whole lot more. But these have barely scratched the surface of DAO, DEXs, and dApps. And in the future, we’ll see an influx of many more decentralized protocols.