As technology keeps evolving and will soon be smart enough to work on its own, traditional ways of interacting with each other are becoming old, slow, and less trustworthy.

Financial systems that we all know of will become replaced by new systems that rely on its users and huge databases, rather than big companies. This process, known as decentralization, has caught up with all parts of the traditional banking system, including exchange, contract signing and controlling money.

In this article, we will dive into what’s known as decentralized exchange, how it is connected to the new, decentralized financial system and what benefits it provides.

Decentralized exchange - definition

Decentralized exchange (DEX) is part of decentralized finance (DeFi), a system that enables usual banking processes, but without an intermediary or an authority. The whole system works on cryptocurrencies and is supported by decentralized smart contracts.

These smart contracts are not like the normal ones, written and signed in the bank, for the bank to keep. They are transparent, direct, and offer a safe ground for direct transactions between users. They are preserved in blockchains, long and layered chunks of data that are hard to modify and break into, making them a safe place to store data.

Blockchains are independent masses of data that sooner or later had to be connected in order to make inoperability possible. That’s where connecting blockchain networks kicks in. Often called bridging, this system allows users to safely lend, borrow and spend money in form of cryptocurrency.

When it comes to safety of these systems, there is usually no need to be worried. Blockchain technology is built on the principles of cryptography. 

Personal data isn't stored on a central server, like a single computer, that would be an epicenter in case of a leak or faliure; instead, data is distributed across numerous computers, making it more difficult for malicious actors to succeed in their actions.  Transactions on a blockchain are encrypted, adding a layer of privacy and security.

Benefits of decentralized exchange

Democratic system in the area that revolves around money sounds contradictory at first, but decentralization makes it possible.

Decentralized exchange of cryptocurrencies is made directly and quickly, without other parties overlooking the process and regulating or charging it.

All exchanges are done anonymously, with each user hidden behind a specific code acting as a pseudonym. This makes the whole process secure, and hard for hackers to reach private information. However, there is still a lot more job to do regarding the overall privacy of DeFi, but thing are moving in the right direction.

When exchanging crypto, make sure to use trustworthy platforms like Binance or Kraken. That way you won’t have to fear of data leaks or financial losses.

Conclusion

Decentralized exchange is a new, revolutionary way of financial interactions in the online world. Free from authorities, and secured by rigid protocols and encryption, DeFi is creating a new world where banks and middlemen will become a technological excess. We are excited to see what the future will bring us, and how economy will become a space where everyone is welcome, regarding of the origin and financial coverage.