Understanding decentralized exchanges(8 mar '18)
- 2. Background
- 3. What is a centralized exchange?
- 4. 99+% of all crypto trading happens on centralized platforms
- 5. Anatomy of a centralized exchange ● Hot wallet (very small percentage) ● Cold wallet (most funds stored this way) ● SQL database ○ User accounts ○ Trade activity
- 6. Centralized exchanges take custody of user funds
- 7. Benefits of centralization It’s not all bad ● Fast trades ● Talk with a real person to resolve problems ● Fiat bridge ● Liquidity ● Users don’t need technical understanding
- 8. Drawbacks of centralization Not all that glitters is gold ● Rely on technical competence of exchange operators ● Massive hacks ● KYC requirements (varies based on jurisdiction) ● You don’t have custody of funds
- 9. Is there a better way?
- 10. It depends. There are tradeoffs.
- 11. What is a decentralized exchange? Let’s look at examples Fully DecentralizedPartly DecentralizedFully Centralized
- 12. Digging deeper: comparisons Partly Decentralized ● Example: radarrelay.com ● Business logic split between centralized server and smart contracts ● Faster ● Not as expensive ● Less problems ● Less secure (centralized code can’t be audited) Fully Decentralized ● Example: etherdelta.com ● All logic lives in smart contracts ● Slowest ● Most Expensive ● Prone to problems ● Most secure (99% of code can be audited)
- 13. How is Decentralized Exchange Possible? Why now?
- 14. Ethereum is a general purpose blockchain Turing complete programmingLimited scripting
- 15. 3 major elements for today’s DEX General Purpose Blockchain Browser Wallet DEX Protocol
- 16. The Glue Browser app (javascript) calls out to Ethereum smart contract *through* MetaMask
- 17. There are many protocols Implemented as Ethereum Smart Contracts 0x Swap Bancor Wyvern Blockchains With Built In Protocols for DEX Ripple Stellar Komodo Other Ways Atomic Swaps
- 18. Demo
- 19. Questions?