[Question] Hernan asks, "I could find different types of DEX.
Is it just the marketing word for p2p trading
or does it really imply standards,
fundamentals, or specific technology?"
Hernan, it's a marketing word.
It doesn't actually mean anything
because the word decentralized in itself,
isn't really a definition.
It describes a spectrum.
It describes a group of behaviors.
How decentralized?
Which part of it is decentralized?
Are there parts that are not decentralized?
Well, all of these questions will lead you
to having certain criteria and using those criteria,
you can decide whether what you're looking at
is really a DEX or is it a CEX?
Now, this is probably the only type of CEX that is bad CEX.
CEX, centralized exchange, CEX.
My producer is laughing behind the camera.
It's very difficult to keep a straight face
when I make such silly puns at this moment.
But, if you wanna know the difference between
a centralized exchange and a decentralized exchange,
you have to ask some follow up questions.
One, is it custodial or non-custodial?
That's a very important criterion
I think that's the foundational criterion.
Two, does it require some kind of identification?
Does it follow, know your customer, KYC or AML laws?
If it is, it's probably backed by a company.
That company is in a jurisdiction, that jurisdiction
imposes regulation and the company has no choice
but to extend those regulations to its customers.
By comparison, the true decentralized exchange
doesn't have a company behind it,
and therefore often doesn't really have
any of these regulations.
So, does it have KYC, AML?
Do you need to prove identity in order to use
these decentralized exchanges?
That's the second criterion.
Third, does it operate across multiple cryptocurrencies
and Blockchain or is it limited to one?
Dependence on only one blockchain,
to me is a reduction in decentralization.
So for example, if it's an Ethereum ERC-20 only exchange,
that's somewhat centralized.
It's centralized in the respect that it is centralized
on Ethereum and doesn't support other chains.
So, if I see something that does Bitcoin Blockchain,
Monero, Ethereum, Zcash on a whole bunch of other things,
then I'm going to think of that as being slightly
more decentralized than the previous one.
Four, does it have a decentralized order book
or does it rely a central service
for matching buyers and sellers?
Five, what is the interface that you're using to access it?
Is it a website?
And if it is a website,
that is a centralized single point of failure.
Is it a website that is served off an ENS,
Ethereum Name Service or IPFS link
or some other distributed storage decentralized web,
that allows you to access it without a central point
of service?
If it does, or is it served
through a peer-to-peer application
that you install on your desktop?
Again, those are good indications that it's decentralized
in a way that other things perhaps are not.
Those are some of the key criteria that I would consider.
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