Introduction
A decentralized cryptocurrency exchange is an exchange market that utilizes blockchain or another decentralized technology to enable peer to peer transfer of digital assets without reliance on a trusted third party to hold funds.
Advantages over centralized exchanges
Centralized cryptocurrencies exchanges have experienced significant hacks and loss of funds due to problems with cryptocurrency security. The Mt. Gox exchange was forced to halt trading and declare bankruptcy in 2014 and after hot wallet private keys were compromised and approximately 744,000 BTC were stolen. Bitfinex lost millions of dollars in BTC which were socialized throughout the community. Decentralized exchanges may also provide improved censorship resistance and resilience to regulation as they hold no funds in central location to be seized.
Challenges
Decentralized exchanges face various technical challenges in order to match centralized exchanges in terms of liquidity, speed, and feature sets.
Development
Many decentralized exchanges have launched and are in active development however centralized exchanges are still responsible for a majority of cryptocurrency transactions. A variety of protocols intended to develop standards for interoperability for decentralized exchanges such as 0x are being developed.
Atomic Swaps
Atomic swaps allow users to directly transact with one another peer to peer while bypassing even decentralized exchanges. The first atomic swap between Bitcoin and Litecoin was performed by Litecoin creator Charlie Lee on Sep 22, 2017.
List of decentralized cryptocurrency exchanges
Timeline
People
Further reading
Mt. Gox Trading Halts as Bitcoin Businesses Move to Assure Investors
Daniel Cawrey
Networked liquidity — projects solving the chicken and egg problem
Radar Relay
State of decentralized exchanges, 2018
Nathan Sexer
The Bitfinex Bitcoin Hack: What We Know (And Don't Know)
Stan Higgins
Waves Debuts DEX Decentralized Exchange, Mining Power Leasing
William Suberg
Documentaries, videos and podcasts
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Companies