Centralized Exchanges
The Pros or positive aspects of centralized exchanges:
- Centralized Exchanges like Binance, Coinbase, Kraken and others perform a very important functions in the cryptocurrency ecosystem.
- They serve as an onramp for fiat currency into the cryptocurrency economy by serving as a place where cash can be used to buy Bitcoin, Ether or Stablecoins like USDT or USDC in the first leg of many investors journey into cryptocurrency as an asset class.
- They also provide non-custodial wallets, an important safety aspect for many newcomers to cryptocurrency, who are not ready for the big responsibility of self custody.
The cons or downside of centralized exchanges
- Your cryptocurrency is actually stored in someone else's wallet.
- It's as if you got paid and your boss sent your money to the bank, not you, so the bank could safe guard it for you, and hold it for you and pay your bills at your direction.
- Unfortunately their is no government insurance for centralized exchanges to protect you should the exchange be a vicim of insider theft or bad business practices.
- In fact, unlike a bank where your funds are safe even if the bank goes bankrupt, and you should have access to your funds in days. In the case of a cryptocurrency exchange bankruptcy you could wait months to years for your funds.
- And because your funds are in the wallet of the exchange, you stand in line with every creditor for the exchange, and enjoy no special status as a depositor.
Decentralized exchanges
Pros of decentralized exchanges
- Compared to centralized exchanges where you store your cryptocurrency in a bank wallet. Which means you don't actually have ""custody"" or ""control" of your cryotocurrency. In contrast, a decentralized exchange never takes possession of your cryptocurrency. You control it in your own wallet. A situation called self-custody.
- You can still swap or exchange your cryptocurrency for other tokens on a decentralized exchange, but your cryptocurrency stays in your wallet until you use it to swap for another cryptocurrency. Which is a process literally called an exchange.
Cons or downsides of a decentralized exchange
- They do not provide custody of your cryptocurrency, so you must keep it in your wallet, and maintain control over it.
- Self custody means you provide security and no one else is responsible for the security of this wallet, except you.
- Although wallet companies do provide customer service.
- You must evaluate the tokens offerred for exchnge on the exchange yourself and make sure they are not worthless copies or worthless projects.
- It is much easier and cheaper to list your token pairs on open decentralized exchanges. It is harder to list them on closed exchanges because they investigate the tokens, the founders, the people bhind a project before allowing them to list their token for sale.
What does this mean for Hive
- Decentralized exchanges present Hive with a special freedom from the control and influence of centralized exchanges.
- This last two years 2022 and 2023 have seen many exchanges close to Hive and delist our token and/or our stablecoin.
- This has made many completely dependent on Binance-. A large , reliable centralized exchange, but under intense US Government scruitiny and day to day supervision. If Hive were delisted many Hive investors would find themselves unable to cash out their Hive to use to buy Bitcoin or pay living expenses.
- The Splinterlands community has ties to Binance as well, through Binance Smart Chain, but users of Binance Smart Chain frequently use Binance as their off ramp and on ramp into that ecosystem as well.
- Decentralized exchanges are a precious safety valve for Hive investors, and we should use them regularly to maintain that pathway should our token be delisted by others exchanges.
- In addition, decentralized exchanges give you the opportunity to store your tokens there as liquidity pairs and earn daily income, while holding your assets you hope appreciate in value. This not only lowers your basis for those investments, but also provides a stream of income for investors who specialize in providing liquidity, as a main source of income or a side job situation.
Leodex.io
_ This new exchange, created by the founder of the longstanding Hive Community Leofinance is a decentralized exchange offerring not only an alternate pathway to BInance for Hive to Bitcoin trades, but direct Hive Wallet to Bitcoin trades. Additionally in it provides an easy onramp to investors from Coinbase, Binance, Kraken or others. No matter where you buy your Bitcoin, USDT, Ether or others L1 tokens, you can then use Leodex.io to trade for Hive and onramp Fiat into Hive through Leodex.io
- Like all exchanges there is a learning curve for using it, and as a new exchange, it's service and processes will improve and bugs will disappear as people use it and report the bugs.
- Initially you needed a Desktop wallet called Keystore to use it, but now you can use Defi wallet .
- The team has been here on Hive since we were all on Steemit, so they are not going anywhere and are unlikely to rugpull the exchange users and disappear.
- I suggest you spend a few minutes getting to know this exchange. Then you will see how eay it its to earn transaction fees as a liquidity provider in the Leo-Cacao trading pair pool.
- It is similar to providing liquidity to trading pairs on Tribaldex, but currently pays much higher APRs.
- But...don't take my word for it, do your own research, and invest if your research shows it is worthwhile for you.
