Suppose you have $100 and you want to invest it in silver because you believe it is a rare metal that will increase in value. You have two options for conducting this transaction:
The first option: You visit a store in the city and exchange money for a certain amount of silver, which you then entrust to the store owner for safekeeping. However, there are potential risks involved in this transaction. The store may be susceptible to theft or natural disasters, and there is no guarantee that the store owner will have the financial means or insurance to compensate you in case of loss or damage to your silver. Additionally, there may be laws in place that prohibit store owners from accepting money to store precious metals, and in such cases, the government may confiscate not only the store owner’s metal but also any metal that you have entrusted to them. Also, the store owner may be a deceitful person and flee the city with your money (such as the founder of a Thodex exchange). Or the store owner may use minerals belonging to others as collateral for debts, and if he is unable to repay, the minerals may be seized by the creditors(such as what happened with the FTX exchange). It is even possible for the store owner to be a mathematician who developed equations for storing silver and other metals according to an algorithm. certain to maintain a constant value for another metal, but the failure of these equations for any reason led to a severe decline in the value of silver and the loss of everyone (such as the Terra LUNA), or the owner may be summoned to court and get an order to close its store in the country for not complying with local laws (such as the Binance exchange in the United States of America). The store may also get rid of some metals , including silver (this problem occurs in many central platforms).
The second option: You visit a store in the city and purchase some silver. However, this time you decide to store the silver in a high-security safety box at home. The safety box is designed to resist fire and damage, and can only be opened by you or someone to whom you give the key. This scenario can be compared to the world of cryptocurrencies, where the first option is akin to central exchange, while the second option is similar to decentralized exchange.You go to one of the stores in the city and buy an amount of silver, but this time the silver is stored in a high-security safety box at home. This safety box is resistant to fire and damage and cannot be accessed unless you open it for others or hand them the key.
This scenario can be compared to the world of cryptocurrencies, where the first option is close to central exchange, while the second option is similar to decentralized exchange.
Advantages of decentralized exchange
First: Security
Decentralized exchanges are considered more secure compared to centralized exchanges. Despite the advancements in security measures of centralized exchanges, they remain vulnerable to hacking incidents. Such incidents have occurred numerous times in the past. On the other hand, hacking a crypto wallet that is utilized in a decentralized exchange is considered impossible if it’s chosen with care and the password is well-maintained.
Second: Reassurance
In the past, there have been instances where all accounts of a particular country were restricted from trading on a centralized exchange or a government prevented a central exchange from operating, which caused harm to investors. However, in a decentralized trading exchange, you can rest assured that such incidents will not occur. You cannot be banned, and your identity remains anonymous. You are the sole owner of the digital assets in your wallet and have the complete authority to decide how to dispose of them. No one can harm your wallet or access your account.
Third: Privacy:
Decentralized exchanges do not store a database of traders or record their personal information. This means that your information and property in the wallet cannot be identified by any indivual or entity unless you disclose it willingly.
Fourth: Ownership:
In a decentralized exchange, you have complete ownership over the cryptocurrency in your wallet. On the other hand, in a central exchange, the exchange itself owns the cryptocurrency in the wallets, and you can only buy and sell what is available in the central platform’s wallet.
Fifth: Freedom:
In decentralized exchange, you have complete freedom regarding the amount of cryptocurrency you want to trade, and there is no maximum limit for buying, selling, or sending and receiving the currencies, unlike centralized exchange.
Sixth: Priority of ownership in new tokens
Token generally start on decentralized exchange and owning them before moving to centralized platforms may represent a good investment opportunity.
Seventh: Low commission:
The commission for buying and trading digital currencies is lower on decentralized exchange.
The importance of starting AMAL in decentralized exchange
Three Arab tokens began trading directly on the central exchange, and at that time, many cryptocurrency traders downloaded central exchange applications, such as Whitebit or Xt, to purchase these currencies. In the world of cryptocurrency, a currency either starts on its own blockchain, in which case it is called a “coin”, or it is based on a previously established blockchain and begins trading on a decentralized platform, which is the case for most cryptocurrencies, called “tokens”. If it does not fall into either category, it may be a matter of exploitation by the founder team of buyers.
Starting AMAL on a decentralized exchange is very important, for the following reasons:
First: Avoid exploitation
When a cryptocurrency is offered directly on a central exchange, the currency team sells it to investors directly, rather than investing and buying together from the beginning and then all moving to the central exchange. This allows investors to benefit from the liquidity and expected price increase on the exchange.
However, the case of AMAL is completely different. The currency was created to be fully owned by its community, and no parts of the currency were distributed to wallets owned or managed by the team as is done in most cryptocurrencies. In the case of AMAL, the community will move together to the central exchange, and the interests of all investors will be treated fairly.
Second: Building a liquidity pool and real value
In a centralized exchange, the price of a cryptocurrency is determined based on supply and demand, similar to how stock market shares are priced. However, this can make the currency vulnerable to significant decline in value due to the absence of a stable liquidity pool. This is where decentralized exchanges come in — by building a liquidity pool within the cryptocurrency community, these exchanges help to limit the decrease in value on centralized exchanges. In fact, the price on the centralized exchange and the decentralized exchange must be reconciled in order to prevent fluctuations in the value of the currency. If the price decreases on the centralized exchange as a result of increased supply and lack of demand, people or even bots can purchase the currency at a higher price on the decentralized exchange, thereby narrowing the price gap between the two platforms.
It can be said that the difference between the cryptocurrency that was started directly on the central exchange and the cryptocurrency that was started on the decentralized exchange is like the difference between the traditional fiat currency that is issued after depositing a cover of foreign currencies or gold in the central bank, and that which is printed without any cover.
In addition, in the case of AMAL, its liquidity pool contains two functions that contribute to mitigating the price decline (buy and burn — direct burn).
Third: Operating AMAL techniques
If a cryptocurrency is offered for trading directly on a central exchange without having its own blockchain, it will become a currency that lacks any distinguishing technologies. This is because central exchanges only support basic operations such as buying, selling, sending, and receiving. Nowadays, creating a technology-free cryptocurrency is considered a modest effort, regardless of whether the cryptocurrency starts on a centralized or decentralized exchange.
Therefore, because AMAL contains a mixture of distinct technologies, it is important to start and grow on a decentralized exchange.
Fourth: Supporting AMAL project
When a cryptocurrency is offered for trading solely through a central exchange, the funding for the currency project is dependent only on obtaining buyers’ money. This approach can provide high liquidity if there are many buyers on the central exchange, but it may cause problems for the project in the future if the number of buyers decreases.
AMAL is a humanitarian project that aims to sponsor orphans through donations. To achieve this, 1% of buying and selling transactions are deducted. In most cases, this deduction may not be activated on central exchanges. By deducting a certain percentage of transactions, the project’s funding can be ensured in a stable manner, making the process monitorable by investors. Each buyer is informed about the project, its sources of financing, and accepts participating in financing through purchase and sale transactions.