Understanding the Concept of Decentralization

Understanding the Concept of Decentralization

04/08/2020 by Koinal
Decentralization is a principle of blockchain technology and cryptocurrency. The blockchain's robust security rested on its decentralized network and absence of a central authority for approval. The computer nodes that confirm and record transactions operate without central control. Consensus without interference created a reliable system of permanently distributed ledgers.

Currency exchanges grew out of a pattern of peer-to-peer trades. Some of the early exchanges offered an anonymous environment for exchanging cryptocurrency. As the volumes of trading grew, many currency exchanges offered speedy centralized services. These financial technology pioneers tried to bridge the gap between regular currency and digital currency systems. They provided a balance of centralization through a virtual platform to buy, sell, or trade. They charged fees for their services and provided an online environment for safe and secure exchanges and storage.

The Centralized Exchange

Centralized exchanges offer high-speed transactions and usually have a wide range of currencies available for purchase. Centralized exchanges provide repository services, and buyers and sellers can carry out transactions without the actual movement of digital currencies. The exchange can assign ownership electronically. The centralized exchange offers a style of trading that is similar to regular securities trading.

Advantages of Centralized Exchanges

The centralized exchange evokes a familiar feeling. There is an owner, a virtual counter, and a vault. It offers tools for setting up a transaction. The exchange charges a fee for each transaction and has a strong incentive to handle the volume quickly and efficiently. 

Some exchanges can offer nearly immediate confirmation of transactions. Exchanges typically cannot provide an easy conversion from fiat or cash to cryptocurrency. Koinal fills this gap with an easy process from bank cards to cryptocurrency.

The Decentralized Exchange Trend

Decentralization has increased in recent years as many traders have demonstrated a preference for this type of system. Exchanges have responded by offering services and specially designed platforms to accommodate peer-to-peer transactions. The fee structures may be more favorable, and this may particularly affect high volume trading.

Advantages of Decentralized Exchanges

Privacy may be a goal of decentralized trading. In the early years of Bitcoin, anonymous traders preferred the freedom of peer-to-peer trading. They used exchanges to establish offers and accept bids. Since centralized exchanges require a public key, the exchange’s role in security is vital. Some investors feel that there is greater security in peer-to-peer trading because of potential attacks on exchanges. When investors leave their holdings on the exchange storage site, their safety depends on the exchange to develop and follow procedures to deter and prevent hacking attempts. 

Many investors feel that they can control costs better in a decentralized or DEX exchange. Lower fees may be a strong incentive for using a decentralized or DEX platform. When placing a transaction on a DEX, the parties must pay the blockchain fees or gas. The size of the gas payment may affect the priority or speed of the transaction. 

Koinal.io Works with Centralization and Decentralization

Today, there are two distinct types of cryptocurrency exchanges- the decentralized model and the traditional centralized type. While there may be advantages for one type over the other for your investment strategy or trading style, Koinal offers its easy purchase portal for users of both types of exchange.

As described above, there are disadvantages and benefits for traders in each type of exchange. They include the speed of transactions, costs, and ease of doing business. The best type for a given investment may depend on purely personal preferences as well as market conditions. Koinal assists your investment program by convenient purchases of cryptocurrency using bank credit cards or bank debit cards. Our safe, simple, and secure purchase services help you achieve your goals using a traditional exchange like Binance or a more decentralized type like BinanceDex.

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