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According to recent statistics, over 90% of cryptocurrency trading volume takes place on centralized exchanges, while decentralized exchanges only account for a small fraction of this. The popularity of decentralized exchanges, however, is increasing as more people become aware of the benefits they offer over centralized exchanges.
Through this article, we hope to help you get acquainted with DEX a bit more while focusing on the features of both CEX and DEX. Hopefully, by the end of this article, you will have enough understanding to know which exchange would be the right one for you.
Centralized exchanges are platforms that act as intermediaries between buyers and sellers of the cryptocurrency. They hold users’ funds in their own wallets (also referred to as custodial wallets) and execute trades on behalf of their users.
On the other hand, decentralized exchanges are platforms that allow users to trade cryptocurrency directly with one another without the need for a central authority. Therefore, on DEX you have complete control of your funds and can choose and execute your trades without any dependency on the exchange for your funds.
Their user-friendly interface and ease of use make centralized exchanges a popular choice. CEX also offers a wide range of trading options and support for multiple cryptocurrencies.
However, centralized exchanges have several disadvantages. One of the main drawbacks is that they have custodial wallets, which means that traders do not have full control over their funds. In the event of a hack or security breach, traders may lose their funds. This is because the exchange holds the private keys to the wallets and has full control over traders’ funds. Given the recent SEC crackdowns led by bankruptcy pleas by crypto exchanges, more traders are seeking a safe space where they can harbor their cryptocurrency and access them without the fear of losing them with the exchange.
This has been a recurrent theme in the CEX space. An example would be the case of Mt. Gox. Back in 2014, the exchange was hacked, and 850,000 bitcoins worth over $450 million at the time were stolen from its users. Several such hacks over the years have proven that it is always a good idea to have complete control over your funds without relying on a central authority to manage them.
Decentralized exchanges (DEX) offer a solution to this problem by giving users full control over their funds. Instead of holding users’ funds in a central wallet, decentralized exchanges allow users to store their cryptocurrency in a personal wallet and trade directly with one another. This eliminates the risk of losing funds in the event of a security breach or hack.
Another advantage of decentralized exchanges is the ability to trade perpetual futures contracts.
Perpetual futures contracts are a type of derivative that allows traders to speculate on the future price of a cryptocurrency without an expiry date. They are similar to traditional futures contracts but without the expiration date. This means that traders can hold a position for as long as they wish, and can take advantage of both rising and falling market conditions. Trading perpetual futures on a DEX is probably one of the most potentially profitable ways of trading as it helps smoothen out the highs and lows of the market and tends to hand in a handsome return.
Further, trading in perpetual futures using leverage can make the trade more attractive as you can trade with sums higher than what you hold in your wallet. Eterna for example provides up to 125x leverage to its investors, whereby you can multiply your potential profits by 125x by choosing the right cryptos to invest in.
In a nutshell, there are quite a few features that are gradually making decentralized crypto exchanges, the exchange of choice for many traders and investors.
Let’s do a quick recap of the DEX features:
Decentralized exchanges offer a more secure, private, and accessible trading environment compared to centralized exchanges. They are also less susceptible to censorship and offer a wider range of trading options while giving users full control over their funds, eliminating the risk of losing funds in the event of a security breach, and allowing for the trading of perpetual futures contracts with leverage thereby making trades potentially profitable. As the cryptocurrency industry continues to grow, it is likely that decentralized exchanges will become the preferred choice for many traders and investors.
If you would like to invest with leverage into perpetual futures DEX while you have complete control over your crypto, then hop on to the Eterna Perpetual Futures DEX to experience control firsthand. Sign up for the waitlist and get early access as soon as the DEX powerhouse launches.
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