Blockchain startup Gnosis has just launched the decentralized exchange Gnosis Protocol, The Block has reported. Gnosis Protocol will allow users to "trade any token with limited slippage."
The exchange is based on a new ring trading mechanism. Traditional exchanges usually match a buyer with a seller, however, in the case of ring trading, more than two people can use a ring transaction using more than two assets, which solves the problem of trading pairs with low liquidity.
During its private beta phase, Gnosis Protocol processed over $2M in transactions. The first decentralized app (dApp) created in Gnosis Protocol was the Mesa platform. It was launched and supported by dxDAO, an organization that develops and promotes DeFi protocols.
Gnosis developers expect their new product will be integrated in DeFi projects that need liquidity such as Compound.
Gnosis CEO and cofounder Martin Köppelmann has highlighted this is a totally decentralized exchange:
"The upcoming Gnosis Protocol is fully decentralized. There no admin key or overwrite whatsoever. We don't have it, and dxDAO doesn't have it."
What are the main differences between a centralized and a decentralized exchange?
- In centralized exchanges, users deposit their cryptocurrencies, and the platform safeguards them and ensures they are available for withdrawal. However, in decentralized exchanges the exchange never stores the cryptos, but transfers them between individual wallets.
- Users who store their cryptos in a decentralized exchange do not have a private key that gives them ownership of their funds, so technically, these belong to the exchange. In the case of decentralized exchanges, users, by keeping their assets in their own wallets, retain ownership of them.
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