This article was first published on Komodo
For years, increasing decentralization has been one of the main objectives of the blockchain industry. While this is a worthy, albeit rather abstract, goal, the word “decentralization” now seems more like a marketing buzzword than it does a design principle or guiding ideology.
This is most evident when it comes to digital asset exchanges. Recognizing the challenges of centralization, like custodial trading and massive security vulnerabilities, many exchanges, both old and new, have taken to calling themselves decentralized exchanges (DEX) without ever explaining the properties of a true DEX or how they rise up to meet the standard.
While many of these so-called DEXs are, indeed, less centralized than traditional custodial exchanges, they still bear the mark of centralization. Just because an exchange is slightly less centralized than a fully centralized exchange doesn’t mean we should call it a DEX.
In this blog post, we will establish the core requirements that must be satisfied in order for an exchange to qualify as a DEX. Then we’ll explain how AtomicDEX, Komodo’s third-generation atomic swap powered DEX, is the only exchange in the industry that satisfies all conditions.
The debate over the word “decentralized,” and what exactly it means, is not a new one. In this excellent essay by Tony Sheng from September 2018, a few different definitions of “decentralized” are put forth:
- “‘Decentralized’ is defined as the opposite of ‘centralized.’ ‘Decentralized’ is an ‘antonymic definition’— defined only as the opposite of something else.”
- “Cambridge Centre for Alternative Finance describes decentralization as a property that emerges from the roles, behaviors, and influence of actors on each layer–protocol, network, and data of a distributed ledger.”
- “Vitalik takes a crack in early 2017: ‘Blockchains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of ...
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