Bitcoin on Decentralized Exchanges

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Photo by Chris Liverani on Unsplash

Wikipedia defines a Decentralized Exchange as follows:

A decentralized exchange (DEX) is a cryptocurrency exchange that operates in a decentralized way, i.e., without a central authority. Decentralized exchanges allow peer-to-peer trading of cryptocurrencies.

An excerpt from Investopedia defines Peer to Peer Trading as follows:

In the context of currencies, P2P refers to the exchange of currencies that are not created by a central banking authority, and an especially common application is with cryptocurrency exchange networks such as Bitcoin. Currencies that are not traded through a physical exchange, such as through the use of coins and banknotes, are considered virtual currencies. Virtual currencies are transferred between parties electronically.

Peer-to-peer exchanges allow individuals to move currencies from their accounts to the account of others without having to go through a financial institution. P2P networks rely on digital transfers, which in turn rely on the availability of an internet connection. This allows individuals to use computers as well as mobile devices, such as tablets and phones.

Peer-to-peer currencies are not created or exchanged in the same manner as those created by central banks. The creation of new currency, as well as the recording of transactions between parties, is managed through a network of computers that are not maintained by government authority and is thus maintained by the collective. In cryptocurrency exchanges, these distributed ledgers can confer what P2P advocates consider to be a notable security advantage; with transactions recorded on every peer’s network, it is very difficult to overwrite or falsify ledgers in a cryptocurrency exchange.

Let’s start with those definitions. By understanding these, we can form a general insight into the best practices to ensure that we are truly using the DEX appropriately.

About the author

Henry is the Founder and Executive Managing Director of Compumatrix and Networks International. He is also the Editor-in-Chief of the Compumatrix Bloggers' Network.

Comments

    1. It would be nice if we can get businesses sold on ecurrency, and then we can pay their wallets directly with ecurrency and save all of these fees. Once ecurrency is being used more regularly in the world marketplace, this will probably beccome a more common practice. So we just need to practicew this among our realm of peers and helpi it become a common practice!

      1. I think we are headed in that direction already of the ability to do way more transactions online. It never ceases to amaze me how fast technology is advancing in this day and age. Online bill pay, online shopping and food delivery just to name a few.

    2. Dealing with each other outside peer-to-peer will not affect the value on the market and we exchange crypto for a service or item. This is kind of like trading work for a friend for help with my plumbing. I think that working like this will be an advantageous avenue for many of the transactions we commit on the blockchain with digital currency.

  1. Peer to Peer transactions is how Satoshi envisioned Bitcoin exchanging to flow with no middle man or entity needed. This would avoid fees and help to maintain privacy.

  2. I love Peer to Peer as it is a great way to go. Love the fact there is no middle man or entity needed.

  3. To have that satisfaction that you know that person you are dealing with. Whether a personal contact or a business an almost instant Transaction Peer to Peer.

  4. I love the idea of P2P!
    The transaction is convenient, fast and ease-of-use.
    Transferring funds from one person to another can be accomplished through a click of a button and a very modern way of doing business.

  5. I love P-2-P for the saving in fees, the time is much faster to move products service or money around by cutting out the middle man. As well as moving cryptocurrencies around the world with the interference of the government. Also much faster by transaction by cutting out all the red tape.

  6. Doing P2P (Peer To Peer) transactions on a DEX (Decentralized Exchange) is an excellent way to experience the numerous benefits of using Cryptocurrency and Blockchain Technology. Here are my favorite 3 benefits:
    1. The speed of COMPLETING a transaction is remarkable and usually only takes about 3 seconds, anywhere in the world! (Compare that to 3 to 5 business days with banks and you can begin to appreciate how different this is.)
    2. The transaction fees are tiny, even for large transactions.
    3. You don’t need to get help or permission from a third party, which saves time and empowers individuals to operate globally without even having a bank account.

    1. Totally agree Kevin. I believe we are on the second step of the growth of Bitcoin. The shear numbers of new users is growing everyday. Institutional financial groups and private banking is posting huge dollars into Bitcoin and Cryptos.
      P2P will catch on as many companies jump on the bandwagon.

  7. I cannot wait for P2P to become the norm. I am so tired of the snail paced banking system that takes two working days to effect a payment transaction, and God forbid you try and send money on a weekend!! Then it could take 4 days or longer. I recently had the occasion to have to bank a cheque that someone gave me. 10 days to arrive in my account!! They have the cheek to tell me its their policy. Grrrr. Roll on Decentralization and P2P!!

    1. Snail mail is becoming obsolete on so many levels. Like you I cannot wait until the P2P program becomes the norm. As it is now, I find myself carrying next to no money as I use my various cards for just about everything. Local governments are accepting a variety of payments including Bitcoin. Certainly increases the speed of transfers and payments.

  8. One of the big advantages of a dex is the fact that there is not a single point of failure. The mainstream exchanges and onramps are centrally controlled. They can determine how much you buy, when you can have your funds, if the government comes knocking they will give your funds away. A dex removes all of these outside factors.

  9. Decentralization & P2P, because of Compumatrix, have become my purpose in sharing with my community, family & friends. Once it sinks into the head & hearts of those who don’t understand how valuable this new ecosystem is, a whole new financial paradigm will be seen and nobody will want to be left out of it. It’s time to educate ourselves and take our power back from the corrupt centralized systems we’re so used to. Bring it, P2P…humanity is ready.

  10. I love p2p for the ease-of-use. and the quickness of the transactions no matter where you are in the world, from one person to another and the other reason is the added perk of the very small costs involved. anyway of saving a bit of money is a good thing in my book.

  11. P2P is really the only way TO exchange – Meaning it is outside any scrutiny and allows us to deal with individuals over institutions. Maybe not face to face, but definitely person to person. This is true business as it is meant to be. And it falls outside the commerce clauses of many jurisdictions and so is not subject to potentially stifling regulations.

    I always wondered why one had to pay a central authority in order to trade a snowmobile for a pickup truck.. As long as the two parties are in agreement and happy with the deal.. No need to involve anyone else.

    DE centralized. Way better than anything centralized.

  12. FIAT is the “drug” of bankers, the “Centralized” entities. We “users” have become heavily addicted to its use, we “gotta have it!”. As long as we are “hooked” and ‘dependent’ on using it (mentally), that is problematic. When we understand and embrace the concept that “decentralization” frees us from that mental dependence, then we can fully appreciate that it can “set us free”.

  13. P2P exchanging and decentralised trading platforms of cryptocurrencies are sure to revolutionise the entire monetary system worldwide by bypassing the centralised government systems and middle men that operate those systems. As more individuals and businesses start to utilise this system for the exchange of not only various cryptocurrencies, but goods and services, then the real revolution will begin and the need to exchange our cryptocurrencies for fiat will no longer be a factor. Hopefully that time is near at hand!

  14. I’m already liking the new blog format. A topic of interest that creates thoughtful comments which further enhances the education provided by the subject matter. Reading not only the blog but the comments provides great insights.Well done to all.

  15. Peer to peer looks to be right around the corner. It really should be a game changer. I think we just have to worry about the government hating the competition. Putting an important looking person on a piece of paper and copying it billions of times gives a lot of power to those who distribute them, hence the danger of them passing laws to make competition illegal.

  16. In my point of view, the decentralization came to solve a huge problem of the actual exchanges, the custodian of the criptos. In DEX you have the custodian, not the exchange, very similar to P2P.

  17. BItcoin has made it possible to have many peer to peer networks because it is a virtual currency and it can be accessed and used by anyone with a computer and internet connection. Central banks usually rob those who use their currency because the currency is debt based and is always losing value. Bitcoin on the other hand value is determined by supply and demand.

  18. Technology(Blockchain) and Crypto Currency proves for an Awesome outlook to the Future of Business !
    With those two things , Small Businesses such as Pop-up shops can be up and running at a much faster pace
    than in the past. Introduce Peer to Peer to the scenario and you got yourself an Independent sustainable Business.
    I would like to, in the near future open a small shop selling Crystal and Glass Ornaments and Only accept
    Cryptocurrency as Payment, Peer to Peer

  19. In this world where everything is regulated over our heads a decentralised exchange is like a breath of fresh air. Also the idea of P-2-P is very appealing and hopefully this concept will really take off and gain popularity.

  20. P2P exchanging is the way for the future. Quick, lose the middle man, Less fees, great for small businesses. As this grows it will become the norm!

  21. The other day, I had to deposit money in my bank so I could pay it to another bank. Do to our current situations (and restrictions), I used my mobile app. It was after this day’s deposit time so it would be processed the next day. So I had to wait another day so I could send it to the other bank. This process takes 2 business days. (I used to cash the darn check in Bank #1, walk across the street to Bank #2 and deposit it!) Sometimes they would cash it other times I had to wait until the next day!

    I know you GOT MY POINT! If this were Bitcoin, I would have it where it needs to go in 10 minutes (if not instantly). Cryptocurrencies are working on scalability to reduce THIS EXCESSIVE TRANSACTION TIME!!!!!

    (PS: Bank #2 was not where that money has to go ultimately!) OH MY GOSH!

  22. Decentralized exchanges are mainly for buying/selling/trading cryptocurrencies listed on that particular decentralized exchange. The universal phenomena in most/all decentralized exchanges is that Bitcoin takes a prime place in buying/selling/trading on most/all exchanges. Those that deal with prime importance to Bitcoin, can be called, “Bitcoin Decentralized Exchanges”. In these exchanges, no one controls your account, except yourself. Are these decentralized exchanges SAFE for keeping/storing your most valuable asset, “BITCOIN?” The answer to this is both YES and NO. YES to those who hold small amount of assets and are extremely careful in keeping their system clean. NO to those who intends to hold, bigger quantities of assets, mainly Bitcoin. For storing an asset like Bitcoin, we should use SAFE WALLETS.

  23. You got it s bit wrong, mate. A decentralized exchange like Bitshares can fully serve as a wallet able to safely store bigger quantities of crypto-assets. There is no reason why it should be less safe than a regular non-custodial Bitcoin wallet as you get the same means of protection. That’s why it’s called decentralized.

    The only difference I see is that, as far as I know, there is still no hardware wallet for Bitshares assets like Bitcoin has (Trezor, Ledger Nano S and similar).

    P.S. and you can’t really “store” Bitcoin on Bitshares network – those bitcoins are just liquid and exchangeable/pegged equivalents existing on a sidechain.

  24. The concept of decentralized and p2p transactions are obviously a huge jump forward, and those behind it deserve a lot of praise and appreciation, a considerable amount of reading is needed though!

  25. A DEX or decentralized exchange gives so much comfort of security knowing that there is no one central player controlling or having access to your funds. The only thing that is a little scary about a DEX is that the responsibility for EVERYTHING lies totally on you. You create the passwords. You move the coins or funds in and out of the exchange, it ALL your responsibility and your control.

  26. I have to admit even though the Freedom of no central authority overseeing the operation makes this way business very very intriguing and very very appealing — this way of doing business is also very nerve wracking especially to those of us who are tech savvy or even computer savvy so research and learn is my way now —

  27. The way I see it, so far. Peer-to-peer is what’s best in a Decentralized Bitshares Exchange (DEX). Great to send and receive P2P between two people, and so easy. BUT how can we do P2P if we need the Bitcoin to, say, buy a car? I say this because this possibility exists in many parts of the World. Anonymously, we buy a car… So it was something 100% P2P. Right?
    But won’t the person who sold the car, and me, eventually have to explain how we did it? And yet, it’s still called P2P transaction… This is the part I still didn’t understand… (Asked and heard many explanations, but… not from anyone who has already done this. I mean, people who actually have already bought things such as a house, a car, a boat, very expensive brand new things).

    Now, to pay for services, or do shopping with Bitcoin, I have already done that. And when this happens, it is in a CENTRALIZED way… right?! Because, though I’ve used BTC only, this BTC has turned into my currency to pay for that specific bill. I have used a service which received my Bitcoin and then paid in fiat on my behalf.
    I may sound dumb, but I really (I do hope and expect this to change eventually in the future, but that’s how it works today) cannot call it P2P.

    1. I agree with your looks at this Dora — I had not thought much about that part of this –I was just looking at it over all the parts I had looked at — but using bitcoin and paying for stuff is not p2p because when you use bitcoin it has to be thru a service that changes whatever coin being used into a currency that is being accepted in that locality — thank you

  28. The advent of bitcoin on decentralized exchanges (dex) has helped many of the techies to be creative and come up with their own coins. As this developed, P2P became popular, eliminating the middleman and of course the fees. Given more years and we expect a major shift in the global market through mass adoption of cryptocurrency. I am so thankful that I am with Compumatrix which continually keeps tab on new developments out there. Not only that, many members like me who are not so techy have been encouraged to learn and appreciate what’s in our plate to help us grow our business.

  29. What makes the DEX (Decentralized Exchange) so ideal is that it allows for peer-to-peer trading of cryptocurrencies, which speeds up the transactions, eliminates the transaction fees by cutting out the “middle man”, and there is not a central group or person that controls the exchange. Peer-to-peer trading seems to be right around the corner and I am so excited!

  30. The Decentralized Exchange (DEX) will completely revolutionize the way people do transactions today. I do not think people truly understand the power of peer-to-peer lending. Not only will it bring down the cost of doing digital transactions, but it will also allow for the transactions to be completed quicker. It is just a matter of time before the world is exposed to the Decentralized Exchange (DEX).

  31. just keep reading great posts from back in time on so many facets of this DEX part but putting the p2p part into all of this and knowing the digital end of global transactions and it can be overwhelming honestly if you do stay current or at least try and get caught up on the movement — wow is a good word for me — i keep learning and am very much appreciative —

  32. i am still reading these great blog postings and still moving forward in this great idea and dream of HJ — and as I learn and grasp the overall gist of parts of this biz i also fall behind on others because the changes occur so fast and — so am looking for more info to add to this — it is a challenge but some how it is fun also —

  33. Thank you for your message Henry James. I think it is an interesting read and for me, there are some new things that I have to study more. Peer-to-peer is an interesting concept but I still do not understand it completely. So I have work to do and I will.

  34. This is a very clear and understandable explanation of Peer To Peer trading. It is the best explanation I have read for me to be able to explain cryptocurrency and P2P to others who are interested in this new world of exchange, without a middleman to achieve a trade of value to value.

  35. Thanks for this description Henry James! For the first time a crystal clear description without strange words that I must look up. I have tried to read about P2P, decentralized exchangers and how it works, in other internet articles but every time I get lost in the text and get confused.

  36. Engaging in modern-day transactions sovereignly and without on overseer of the centralized bank, is empowering for the world! We the people of the world have graduated out of a controlled Marxist program, that has held society hostage for over 100 years. P2P is not new. It was used for centuries. I will trade you this much salt for your 4 sheep. We did not need a centralized system then nor do we need one now. We the people have decided to take our power in banking back and have created our own currencies. We have determined what has value by investing in it. We shall carry on the oldest form of trading, P2P without some canopy of governance to tell us what we can and can not do! It is the ultimate freedom!

  37. Thank you Henry for explaining. It’s really important to first understand the main definitions in this industry. We all need to get a grip of all this in order to be able to explain it to others. Though have never tried peer-to-peer yet, it is the future. Let’s get rid of everything centralized.

  38. The Decentralized Exchange (DEX) will completely revolutionize the way people do transactions today. I don’t believe people truly understand the power of peer-to-peer lending, but it will also allow for the transactions to be completed quicker. What makes the DEX (Decentralized Exchange) so ideal is that it allows for peer-to-peer trading of cryptocurrencies, which speeds up the transactions, by eliminates the transaction fees and eliminating the middle man or woman LOL.

  39. I am getting to understand what is peer to peer dealings and the decentralized exchange by reading the blogs and the comments in this section. It’s nice to know that the world will soon be open to using crypto currency and do away with the middleman and save on fees with quick transactions.

  40. Peer to peer  is a very safe decentralized transaction in the world of crypto,now can be exchanged safely through the compumatrix DEX,this will prove to be a safe and easy way for the future decentralized transaction.

  41. It is nice to have what we are actually already doing explained in great detail. It also explains the level of security involved without involving banks or other institutions. Commenting on this subject and many others makes me write in a way that I really try to display that I understand it all and actually know what I am saying. But, as much as I do, I don’t. Thank you for this blog as it helps to get me to a basic level of understanding that helps put it all together.

  42. Peer to peer is great it allows no interference from third parties no exchanges just trading peer to peer there are a lot of currency’s in our portfolio’s to do just that with and we are about to launch so lets all get prepared and be ready for a great time.

  43. I love Peer to Peer. It will make things so much easier. I love when you all break it down. I can digest it all better. Thank you so much. This will open up a whole new cryptocurrency world for us all.

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