#2 Decentralized Finance Explained

Decentralized Exchange Protocols

The above problems attached to a centralized exchange brought in decentralized exchange protocols to mitigate these issues by removing the trust requirement. The protocols require no deposit of funds to an exchange platform instead, users remain in exclusive control of their assets until the trade is executed. In the execution of the trade, it will happen atomically through smart contracts (both sides of the trade are performed in one divisible transaction, mitigating the counterparty credit risk).

Decentralized Order Book Exchanges

There are different ways to implement a decentralized order book exchanges. They all use smart contracts for transaction settlement but they differ significantly in the way the order books are hosted. In particular, one has to distinguish between on-chain and off-chain order books.

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Samuel Olapade

Samuel Olapade

Mantra Dao Africa Community Manager