What is a Trustless Exchange?

Centralized Exchange Risks

The whole cryptocurrency space is abuzz with news that another centralized exchange (CEX) is in trouble and is in a real threat of closing down. It is a trader’s worst nightmare as they are not able to withdraw their money from the embattled exchange. Interestingly, the reason behind its probable demise is poor accounting practices and bad business decisions. Unlike other CEX that closed before, its death blow did not come from the outside from the inside which the management claimed to be an honest mistake.

Control of Digital Assets

To CEX operators your deposits are just numbers under your account name. There is no way for them to distinguish your exact deposits from other deposits of other clients. In reality, they just give you a balance of what you have deposited, and the exact digital assets get mixed up together with the other digital assets of other traders creating a big honeypot waiting to be exploited by hackers or be clandestinely used for the CEX’s operators self-interest. In this case, they have been using customers’ funds to pay for their rewards as well as their token buyback

Beyond and Above Other DEXs

There are some DEXs however that go beyond the usual security afforded by allowing users to use personal wallets. One such DEX is Newdex the first and largest EOS-based DEX in the industry. Aside from enabling users to utilize personal wallets that allow them to directly interact with the DEX’s orde books without the need to deposit and withdraw, it has launched a new smart contract “matching and settlement on-chain. It was released after a comprehensive audit of two cybersecurity firms, Slow Mist Technology and PeckShield.

Why is it called Trustless?

Decentralized Exchanges (DEXs) like Newdex is the full realization of decentralized trading. They are called Trustless Exchange because you don’t need to “trust” a centralized authority or an intermediary to ensure that your trades will be consummated. By virtue of blockchain technology, all transactions are guaranteed to be secure, unstoppable and irreversible. They are unlike centralized exchanges where trades can be restricted and reversed or worst can be withheld for whatever reasons the centralized exchange operators can muster up.

Blockchain/crypto enthusiast from the Philippines.