Decentralized Exchanges (DEX)

A Decentralized Exchange (DEX) is contrasted with traditional centralized exchanges (CEX). Both aim to provide a platform for information sharing and cryptocurrency trading. Unlike centralized exchanges, DEXs achieve value coordination and interaction through smart contract execution. In DEXs, users’ asset data and transaction records are not stored on centralized servers but recorded on the blockchain in the form of code, theoretically achieving openness and trustlessness for cryptocurrency storage.

The typical advantages of DEX include decentralization, anonymity, and resistance to censorship. Users hold their private keys for crypto assets, eliminating the need to entrust assets to traditional exchanges and avoiding security issues like asset misappropriation or insider theft. However, it’s important to note that while assets on centralized exchanges are custodied and have customer service support for issues like lost passwords, DEXs do not offer such recoverability; if a private key is lost, the assets are irretrievable.

DEX began to emerge in 2018 and exploded during the DeFi summer of 2020. Although DEX transactions are not as efficient as those on traditional CEXs, and the user base is relatively smaller, the development of DEXs has stepped onto a new stage over the past two years, especially with the introduction of Automated Market Makers (AMMs), effectively solving liquidity issues. Currently, DEXs are evolving towards diversification and feature enhancement, and their future prospects are highly anticipated.

Decentralized Applications (DApps)

DApps, or Decentralized Applications, are applications that run on a P2P network rather than a single computer. Since the advent of P2P networks, DApps have existed. They are designed to exist on the internet in a way that is not controlled by any single entity, making DApps a more reliable and secure system for storing and managing any type of data.

Decentralized Applications, abbreviated as DApps, can be understood simply as blockchain-based apps. The apps we commonly use on our phones are centralized applications. DApps, on the other hand, are built on decentralized blockchain networks, and their underlying technology and logical mechanisms differ significantly from traditional apps.

In traditional apps, users, as consumers, have no influence or interference over the app’s usage rules and face potential risks like commercial monopolies, data interception, and privacy invasion. These require constraints through third-party regulation. The core support for DApps is blockchain protocol, whose rules are set by open-source code. In the DApp network, no centralized node or third-party server can fully control a DApp.

DApps can cover many fields such as decentralized finance, lending, gaming, intellectual property, etc. In DApps, users’ information is stored on the blockchain, effectively protecting personal privacy. Every user is an owner of the DApp. For example, in gaming DApps, the game developer does not have absolute control; in-game assets belong entirely to players, and developers cannot interfere with transactions between players.

Decentralized applications represent not only an innovation in the blockchain industry but also in the app sector. Developed based on blockchain technology, DApps are characterized by immutability, open-source transparency, and resistance to censorship. However, the development of DApps is not yet perfect; they may have code vulnerabilities causing losses to users and may be exploited by gambling games due to lack of regulation. Despite being in their infancy, DApps have immense potential for the future as blockchain technology evolves.