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'A '''decentralized exchange''' ('''DEX''') is a [[cryptocurrency exchange]] which operates in a [[Decentralization|decentralized]] way, i.e., without a central authority. Decentralized exchanges allow [[peer-to-peer]] trading of [[cryptocurrency|cryptocurrencies]].<ref name="wsj">{{Cite news |url=https://www.wsj.com/articles/why-cryptocurrency-exchange-hacks-keep-happening-1531656000 |title=Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy |last=Russolillo |first=Steven |date=2018-07-16 |work=Wall Street Journal |access-date=2018-09-11 |last2=Jeong |first2=Eun-Young |language=en-US |issn=0099-9660}}</ref> Because users do not need to transfer their assets to the exchange, decentralized exchanges reduce the risk of theft from [[Cryptocurrency and security|hacking of exchanges]].<ref>{{Cite news |url=http://www.digitaljournal.com/business/big-investment-in-cryptocurrency-startup-altcoin-io/article/531556 |title=Big investment in cryptocurrency startup Altcoin.io |last=Sandle |first=Tim |date=2018-09-09 |work=Digital Journal |access-date=2018-09-11}}</ref><ref>{{Cite news |url=https://www.wsj.com/articles/alexis-ohanians-vc-firm-invests-2-1-million-in-crypto-trading-platform-1520365270 |title=Alexis Ohanian’s VC Firm Invests in Crypto Trading Platform |last=Castellanos |first=Sara |date=2018-03-06 |work=Wall Street Journal |access-date=2018-09-11 |language=en-US |issn=0099-9660}}</ref> Decentralized exchanges can also prevent price manipulation or faked trading volume through [[wash trade|wash trading]],<ref name="young" /> and are more anonymous than exchanges which implement [[know your customer]] requirements.<ref name="fanusie">{{Cite news |url=https://www.forbes.com/sites/yayafanusie/2018/07/12/good-crypto-bad-crypto-blockchain-projects-gaining-legitimacy-while-spawning-an-underground/#1dc9e34d1078 |title=Good Crypto, Bad Crypto: Blockchain Projects Gaining Legitimacy While Spawning An Underground |last=Fanusie |first=Yaya |date=2018-07-12 |work=Forbes |access-date=2018-09-11 |language=en}}</ref> There are some signs that decentralized exchanges have been suffering from low trading volumes and [[market liquidity]].<ref name="wsj" /><ref name="nguyen">{{Cite news|url=https://www.forbes.com/sites/nguyenjames/2018/06/27/australian-tokens-can-now-apply-for-listing-on-the-third-largest-crypto-exchange/#3e62f9c416c7|title=Australian Tokens Can Now Apply For Listing On The Third-Largest Crypto Exchange|last=Nguyen|first=James|date=2018-06-27|work=Forbes|access-date=2018-09-11|language=en}}</ref><ref name="fanusie" /> On the other hand, some businesses such as Spark, which is a notable disruptor of the remittance industry and for whom liquidity is thus crucial, the decentralized exchange has proven instrumental in enhancing liquidity. Central to achieving this is by working with [[Fiat money|fiat]] pegged cryptocurrencies (also see [[stablecoin]]) <ref>{{Cite web|url=https://www.rootbranded.com/mindshift-magazine/spark-and-project-zephyr|title=RootBranded {{!}} Mindshift Magazine|website=RootBranded {{!}} Saving Great Ideas from Obscurity|language=en|access-date=2018-09-17}}</ref> A decentralized exchange can still have centralized components, whereby some control of the exchange is still in the hands of a central authority. A notable example being IDEX blocking New York State users from placing orders on the platform.<ref name=":0">{{cite news |title=Decentralized[?] Ethereum Exchange IDEX Bans New York Traders |url=https://www.ccn.com/decentralized-ethereum-exchange-idex-waves-goodbye-to-new-york-traders/ |work=CCN |date=24 October 2018}}</ref><ref name=":1">{{Cite tweet |user=Aurora_dao |number=1054917418621984768 |date = 23 Oct 2018 |title= #IDEX will begin blocking new orders from users with New York State IP addresses on Thursday, October 25th (6pm UTC). Cancels and withdrawals will remain active. }}</ref> == Trading using hardware wallets == [[File:Switcheo ledger.png|thumb|left|Ledger login on Switcheo Exchange]] As decentralized exchanges allow users to connect their wallets directly to the exchange to trade, some decentralized exchanges like Switcheo allow the use of transaction signing directly on hardware wallet like Trezor and Ledger wallets to execute trade on the exchange. This allows another layer of security while users use such exchanges, as private keys are never exposed while executing trades. Transactions performed through hardware devices require signing through both the device and the exchange interface. After the user attempts to execute trades on a decentralized exchange, users are them prompted to sign the transactions on their hardware wallet to execute the trade. This requires the user to perform an additional signing step on the hardware device before the transaction is executed. The transaction between the hardware device typically signs the transaction to the decentralized exchange's smart contract to authorize transfers from the user's wallet, and is applicable for both deposits into the decentralized exchange's smart contract and to perform trades. == List of Decentralized exchanges == Decentralized exchanges come in varying degrees of [[decentralization]], where different exchanges decentralize different components. The cost of decentralization is usually paid for in user experience, such as Bisq's fiat pairing where users must put their Bitcoins in a 2/3 multisignature wallet until a fiat transfer is confirmed; where the buyer, seller and a community trusted dispute arbitrator each hold a key.<ref name="bisqrules">{{Cite web|url=https://docs.bisq.network/trading-rules.html|title=Trading and Arbitration Rules|website=docs.bisq.network|language=en|access-date=2018-11-13}}</ref> Many of the current decentralized exchanges exist on only [[Ethereum]] as the Ethereum blockchain does have the most number of digital assets, and most decentralized exchanges are smart contracts deployed on specific blockchains. Examples of Ethereum DEXs include IDEX, EtherDelta & ForkDelta. Some other popular blockchains have also seen the creation of new decentralized exchanges, like Newdex on the [[EOS]] blockchain, and [[Switcheo]] on the NEO Blockchain. Development on decentralized exchanges that supports trading across multiple blockchains through a proxy blockchain have been proposed by Switcheo<ref name="crosschain">{{Cite web|url=https://medium.com/@switcheo/close-but-no-cigar-for-now-e397f39b6e21|title=Cross Chain Vision|website=switcheo.network|language=en|access-date=2018-11-21}}</ref> and OmiseGo.<ref name="omgdex">{{Cite web|url=https://blog.omisego.network/omg-dex-update-6245812a7b2d|title=OMG DEX Update|website=omisego.network|language=en|access-date=2018-11-21}}</ref> {| class="wikitable sortable" style="text-align: center; width: auto; table-layout: fixed;" !Name !Active !Private Key Ownership !Peer to Peer Transactions ![[Open-source]] !Registration Required !Regulated |- |IDEX | | | | | |{{some|Yes}} <ref name=":0" /><ref name=":1" /> |- |Waves | | | | | | |- |Bisq | |{{Yes|Yes}}{{efn|name=client-side-wallets|Uses client-side wallets.|group=DEX_table01}} |{{Yes|Yes}}<ref>{{Cite news|url=https://www.coindesk.com/bitfinex-bitcoin-alarm-centralization|title=Bitfinex Heist Rings the Alarm of Bitcoin Centralization - CoinDesk|date=2016-08-15|work=CoinDesk|access-date=2018-11-13|language=en-US}}</ref> |{{Yes|Yes}}<ref>{{Cite web|url=https://github.com/bisq-network/bisq|title=bisq-network/bisq|website=GitHub|language=en|access-date=2018-11-03}}</ref> |{{No|Yes}} |{{some|Some}}<ref name="bisqrules"></ref>{{efn|name=arbitrator|Uses an arbitrator in cases of fiat-pairing disputes.|group=DEX_table01}} |- |Hadax | | | | | | |- |[[Newdex]] | | | | | | |- |Etherdelta |{{No|No}} | | | | | |- |Forkdelta | | | |{{Yes|Yes}}<ref>{{Cite web|url=https://github.com/forkdelta/|title=ForkDelta|website=GitHub|language=en|access-date=2018-11-03}}</ref> | | |- |DDEX | |{{Yes|Yes}}{{efn|name=client-side-wallets}} | | | |{{some|Yes}}<ref>{{Cite web|url=https://support.ddex.io/hc/en-us/articles/115004488814-User-Agreement|title=User Agreement|last=|first=|date=|website=DDEX|archive-url=https://web.archive.org/web/20181111160201/https://support.ddex.io/hc/en-us/articles/115004488814-User-Agreement|archive-date=2018-10-11|dead-url=|access-date=|quote=You must verify that you are not a US Citizen or Resident since DDEX is currently not available for American users.}}</ref> |- |Switcheo Exchange | | | |{{Yes|Yes}}<ref>{{Cite web|url=https://github.com/ConjurTech/switcheo-eth|title=Switcheo Ethereum |website=GitHub|language=en|access-date=2018-11-03}}</ref> | | |- |} '''Notes''' {{notelist|group=DEX_table01}} [[Huobi]] runs a decentralized exchange called "HADAX" (Huobi Autonomous Digital Asset Exchange), with community voting for which coins to list.<ref name="nguyen" /><ref>{{Cite news |url=https://www.sixthtone.com/news/1001872/artful-asset-exchanges-skirt-chinas-cryptocurrency-ban |title=Artful Asset Exchanges Skirt China’s Cryptocurrency Ban |last=Liang |first=Chenyu |date=2018-03-10 |work=Sixth Tone |access-date=2018-09-11 |language=en}}</ref> [[Binance]] is developing a decentralized exchange.<ref name="young">{{Cite news |url=https://www.forbes.com/sites/youngjoseph/2018/08/11/waves-ceo-decentralized-crypto-exchanges-can-solve-fake-volumes-and-malpractices/#3fbeaba777d0 |title=Decentralized Crypto Exchanges Can Solve Fake Volumes And Malpractices |last=Young |first=Joseph |date=2018-08-11 |work=Forbes |access-date=2018-09-11 |language=en}}</ref> == Drawbacks == Due to a lack of [[Know your customer|KYC]] process, and no way to revert a transaction, users are at a loss if they are ever hacked for their passwords or private keys.<ref>{{Cite web|url=https://www.bloomberg.com/news/articles/2018-01-30/record-crypto-heist-raises-the-appeal-of-a-new-type-of-exchange|title=Bloomberg - Are you a robot?|website=www.bloomberg.com|access-date=2018-11-17}}</ref> == References == {{Reflist|30em}} {{Cryptocurrencies}} {{cryptocurrency-stub}} [[Category:Digital currency exchange]]'