Decred (DCR), the autonomous and open-sourced digital currency, has proposed an ambitious plan to establish its own Decentralized Exchange. The proposal, mainly due to frustrations arising from the listings process on large, centralized exchanges, will be a type of cryptocurrency-only decentralized exchange based on open source software that will allow cross-chain trading to occur directly between users, with minimal fees and simple client-server architecture.
“Decred DEX will be a departure from the profit-seeking models followed by centralized exchanges and DEXs today,” says Decred founder Jacob Yocom-Piatt. “Centralized exchanges make huge profits on listing fees and trading fees. Some of the big ones request ridiculous 6-, 7-, or even 8-figure listing fees. Most DEXs are also based on a profit-seeking model that doesn’t always equal fair play for retail traders.”
Most of the digital currencies run on an underlying token or the blockchain to make a profit. Some of them offer discounts to traders to buy and use their exchange token for lower trading fees. Decred’s DEX will not be charging trading fees from the traders, but they will still have to pay a fee to each server they use to make trades.
“By doing pseudorandom order matching in epochs, say every 10-60 seconds, it puts everyone on a much more level playing field concerning latency. The person using satellite internet in Siberia can’t be taken advantage of by traders with a fiber link at the nearest interchange point, allowing buyers and sellers to transact without the opportunity for day traders to front-run their orders.”
Decred’s DEX will be different from existing exchanges in regards to following points
- Whether Decred’s DEX will happen depends upon participants in an off-chain voting system
- It offers a very simple client-server model.
- Only cryptocurrencies are allowed to be traded.
- Standardized buy/sell order sizes to make it easier to match traders.
- Support for any trading pair by market demand.
- The trader will be able to send the funds first.
- A trading reputation system will be built to discourage “bad actors.”
It will be similar to other exchanges in regards that traders will always have custody of their funds. And it will also feature Atomic swaps to match buyers and sellers without intermediaries through basic smart contracts.
“No DEX to this point has been solely created in the name of the public good, for the users of crypto in the original spirit of crypto,” says Yocom-Piatt explaining the motivation behind the proposal.
Decred is an autonomous digital currency, similar to Bitcoin, with a strong focus on governance, sustainable funding, and development. It utilizes a hybrid proof-of-work (PoW) and proof-of-stake (PoS) consensus system to secure the flow of transactions. All changes to the Decred network are made with direct community input and settled with a consensus vote.