Satoshi Nakamoto ignited the idea of a decentralization economy when Bitcoin (BTC) was created back in 2009. With time, this invention has started a worldwide demand for decentralization across every sector. People have started to lose faith in the traditional centralized system of things that is inefficient and prone to failure. Blockchain technology paired with cryptocurrencies of different natures has showcased to the world the potential of a decentralized system.

One of the biggest drawbacks when dealing with a centralized entity is the lack of privacy. Alongside that, centralized systems are often governed by rules that tend to be troublesome for the users. Another advantage of a decentralized system over a centralized system is the fact that the later has a single point of operation that can compromise the entire system if it is faulty. Decentralized entities tend to have multiple operating points that are interconnected.

The obvious advantages of decentralized systems are now being realized within the crypto economy as decentralized exchanges are starting to see growing use following several hacks on major centralized exchanges over the past years.

Decentralized exchanges see growing volume

According to data from Ethereum analytics site Dune Analytics, Decentralized exchanges (DEX) on the Ethereum network have recorded new all-time highs. February 2020 saw DEX’s garner over $327 million in trading volume, a 62% rise from the previous month. February’s volume also overtook the previous all-time-high volume of $358M recorded back in July 2019.

The market sentiment shifting towards decentralized exchanges is the result of numerous hacks over the past years. 2019 saw more than 11 major hacks and the hackers managed to steal more than $283 million in cryptocurrency assets. The previous year topped with $875.5 million stolen from just six hacks.

The largest cryptocurrency exchange in South Korea, Bithumb, also experienced an attack in May 2019. The attack resulted in around $19 million stolen. The hack was considered to be an inside job as the stolen assets were from the exchange’s reserve funds. This may have led many to question their trust in centralized exchanges.

The most notable hack from last year was that of the world’s largest cryptocurrency exchange by volume, Binance. Back in May, a combined malware and phishing attack resulted in the loss of 7000 BTC, approximately $41 million at that time.

The aforementioned events are perfect examples of Centralized exchanges not being the best of places to entrust one’s crypto assets to. Anyone storing their assets in a centralized exchange is putting their faith in the organization. Even the smallest of bugs or errors on the part of the exchanges could lead to unrecoverable damage.

The basic advantages of decentralized exchanges over centralized ones, are enhanced Privacy due to no registration requirements or KYC process, no deposit or withdrawals required, and all the transactions are handled by secure smart contracts, and most importantly, no single point of failure, control or regulation.

Some popular decentralized exchanges are the Binance Dex , dYdX and crypto advocate John McAfee’s McAfeedex.com. The backlash against centralized exchanges had turned into a movement at one point dubbed “proof of keys” that was started by Trace Meyer, who suggested that every bitcoin owner who has stored his BTC on a centralized exchange should transfer it to his own wallet.

While DEXs are still lagging behind centralized exchanges in terms of liquidity, recent events promise a potential future for these entities. However, using a decentralized exchange puts some additional responsibilities on the shoulders of the user and the majority of the new users entering the crypto space don’t want to go through all the hassles. This has been one of the primary reasons why decentralized exchanges haven’t gotten the attention they deserve.

