This is going to be a series of articles about decentralized exchanges and the technology that powers them. In this first article, I want to outline the reasons why decentralized exchanges are important, why they are currently failing, and what can be done about it.
World Wide Web Trajectory
One of the biggest elephants in the room in the blockchain space today is the fact that a handful of powerful exchanges are monopolizing the entire industry. Exchanges are the big winners of the 2018 crypto boom and, unfortunately, the entire crypto space is moving along the same trajectory as the World Wide Web did in the early 2000s.
The World Wide Web was envisioned as a technology that would democratize communication and information, but instead we ended up with a few very powerful, centralized platforms on which most of our daily online interactions take place.
Monopolies are never good for any industry. And we’ve seen many examples of problems that the monopolization of the Internet has lead to. The latest Patreon scandal is just one of many cases.
Unfortunately, the cryptocurrency space is following the exact trajectory of the World Wide Web. Cryptocurrencies and dapps were engineered to remove the need for middlemen but ironically most of the power and influence is getting more and more centralized into a few hands. This is mainly due to the fact that most people enrich centralized exchanges by storing their funds on the exchange and by giving the exchange a generous transaction fee on each trade.
We as crypto enthusiasts often say that the goal of crypto is to “unbank yourself” which means that we as individuals take back control of our financial assets. Until now, we have failed miserably, centralized exchanges are like the new banks.
Many cryptocurrency exchanges are unregulated with no regulatory body to oversee their business, meaning they are free to do whatever they like with your hard earned crypto.
Despite this, centralized exchanges will always be important for people who need customer support and are still learning about crypto. Some centralized exchanges are honest and really do make a difference, but to avoid monopolies and single points of failure we need to decentralize trading as soon as possible.
Decentralized exchanges (DEXs) are blockchain based programs that allow anyone to trade with anyone and swap a token or coin on one blockchain to any other token or coin on any other blockchain. That is at least what a DEX should do in theory.
In reality DEXs, failed to achieve significant adoption. Nobody really uses them today, which is really disappointing. The technology is here, yet no developer has been able to execute and achieve adoption.
There are three reasons that DEXs have failed to achieve mass adoption: User Interface, Performance, and Liquidity.
Bad User Interface (UI) is the one of the biggest problems with DEXs. Most DEXs are very complicated to use and simply can’t complete with centralized exchanges due to the fact that nobody dares to use them. This is mainly because most DEXs are not developed with the average user in mind. They are developed by highly technical people for other highly technical people.
Using DEXs is not only complicated, it can also be very slow. As there is no central middleman ensuring trust between actors wanting to trade on DEXs, trust needs to be established across different blockchains. This process of establishing trust can be time-consuming as different blockchains might have different block times and characteristics.
However the biggest issue is liquidity. In most cases your order will never be matched because nobody is really using DEX platforms. Therefore there will not be anyone available to buy the cryptocurrencies you want to sell or sell the cryptocurrencies you want to buy.
Meet Resistance (RES)
Resistance is a decentralized exchange that solves all of the problems described above. This is the reason I chose to become their advisor. It is also a privacy-oriented decentralized exchange with its own privacy coin that makes it possible to trade any cryptocurrency to any other cryptocurrency privately using zero-knowledge proofs.
Over the coming articles I will explain exactly how Resistance solves all of the issues DEXs are facing today.
In the meantime, check out the video I made on this topic and get a chance to win a Ledger Nano S:
Ivan is a blockchain educator, software developer, data scientist, and business developer. His Youtube channel “Ivan on Tech” is a truly global phenomenon spreading knowledge about the blockchain technology to hundreds of thousands of viewers all over the world. Ivan makes the complex simple by delivering entertaining and exciting talks.