Much of the crypto investment space still deals on centralized exchanges like Coinbase, Bitfinex or Kraken to exchange fiat-to-crypto or between coins. As the market grows, this should move to decentralized exchanges.
Many exchange platforms have been overwhelmed to the point of closure recently. More worryingly, their centralized storage systems, although heavily secured, are still central failure points if a hack occurs. The formerly largest exchange Mt Gox had to shut down because of one. Bitfinex also got hacked. More hacks will likely occur because centralized storage is very appealing to them.
Decentralized exchanges (DEX) solve many of these issues. They bring the benefits of decentralization and security to currency exchange and take away the potential for one major hack to eliminate millions of people’s digital wallets. The struggle for their adoption lies in the application of the technology.
What’s out there?
Kyber Network incentivizes network members with its own KNC token to become reserve contributors and provide liquidity for the exchange.
0x enables ‘relayers’ to run off-chain order books and charge for matching buyers and takers, who can then exchange tokens on a trustless ethereum protocol.
Bancor went beyond this and created smart tokens that hold several currencies so by buying and selling it, you can switch from one token to another.