Pros and cons of adopting the Defi Technology in Cryptocurrency exchange platforms

  • Smart contracts — Smart contracts and their applications will be more effective with DeFi applications. Yes, dapps ( Decentralised applications are considered as dapps) can revolutionize the contracts and loan management system. Smart contracts along with DeFi is really a gift for the financial management criteria. It saves time and promotes financial assistance for the population without any regulatory restrictions.
  • Asset tokenization — With DApps, asset tokenization is really complementary. With DApps, you can convert any asset to a token with the assistance of smart contracts as there is no regulation of any central authority. But legal approval checks should be conducted before supplementing Asset tokenization to DApps.
  • Stability and flexibility — Yes, the decentralized applications are packed with utmost stability and flexibility in terms of control and management. They can be managed according to our convenience, by agreeing to proper terms and conditions. So, there is no need for vigilance or third party involvement if we have dapps installed.
  • No worries about the censorship — Dapps are known for their tolerant mechanism. They are completely censorship-free applications and in cryptocurrency exchange platforms, they follow the same. The exchanges and trade in a Dapp powered cryptocurrency exchange is transparent.
  • Expands Peer to peer networks — As we all know, there is already an existence of Decentralized exchange platforms. They help in exchanging coins and fiat currencies without the involvement of any third parties. These DApps can further supplement in improving the service of the decentralized exchange platforms.
  • Security — It is a secure and unhackable application. As the information will not flow from a single point of the source but distributed to multiple sources thereby making the hacking process impossible. The Decentralized applications use blockchain and further strengthen them using their distribution technology to protect the information. They are spread to different nodes and are stable than traditional centralized platforms.
  • Reduced usage of API — This is essentially hopeful in blockchain infrastructure. As the DApps interact with the blockchain, the frontend software of the DApps contains all the cryptographic key infrastructure which in turn triggers the smart contract through the wallet, instead of triggering through API. So, it integrates with the blockchain more effectively than the API. This DApps is a kind of Web3 application model which contains the Web2 infrastructure stack along with additional security elements to integrate with the blockchain technology.
  • Fixing issues is a complicated task: As it is a distributed network, fixing issues and updates require everyone who uses the DApps to update their network and all the copies in their network. Also fixing the bugs is more complicated compared to a conventional website application.
  • KYC approval is not facile — Centralized cryptocurrency exchange platforms have a single-window clearance for the KYC verification, but DApps powered platforms do not have a common authority to check the KYC details and it is a complicated process in dealing with a trusted peer in the application.
  • Complex scaling process — Data validation is not an easy process as built in a centralized network. It should be taken care of right from the beginning to focus more on the outcome and requirements.
  • Trust and reliability — These DApps break out the trust and reliability factor of the third party. But most of the population needs a third party to rely upon on a safe side. So, the trust becomes a question mark when it comes to DApps
  • No legality or corruption flow — Because of the lack of regulation by a third party, there are chances that corrupted money may be circulated through this platform as there are no legal hassles involved. Also, decentralized platforms are not allowed in many of the countries thereby making DApps a difficult one to induct in a cryptocurrency exchange platform.

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MathiBharathi Mariselvan

MathiBharathi Mariselvan

Blockchain Entrepreneur and investor. Cryptoprenuer to be precise. Guiding Crypto enthusiasts and CEOs. You know what, Blockchain is a revolution.