Decentralized Stock Exchange in 5 Questions

Q1: What does Decentralized mean?

A1: Decentralization or decentralisation is the process by which the activities of an organization, particularly those regarding planning and decision making, are distributed or delegated away from a central, authoritative location or group. (aka no political bs)

Q2: What are Exchanges?

A2: An exchange is a marketplace where cryptocurrency, securities, commodities, derivatives, bonds and other financial instruments are traded. The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information for any securities trading on that exchange.

Q3: What are Decentralized Exchanges (DEX)?

A3: Decentralized Exchanges or DEXs are Fully Autonomous decentralized applications made on top of Ethereum that allow cryptocurrency buyers or sellers to trade without having to give up control over their funds to any intermediary or custodian.

Q4: Types of Decentralized Exchange?

On-Chain Order Books: In some decentralized exchanges, everything is done on-chain. Every order (as well as alteration and cancellation) is written to the Blockchain. This is arguably the most transparent approach, as you’re not trusting a third party to relay the orders to you, and there’s no way to obfuscate them. (Ex:Bitshares and StellarTerm)

Q5:What are the Advantages/Disadvantages of DEX’s

Closing thoughts

Many decentralized exchanges have emerged over the years, each iterating on previous attempts to streamline the user experience and build more powerful trading venues. Ultimately, the idea seems heavily aligned with the ethos of self-sovereignty: as with cryptocurrencies, users don’t need to trust a third party.