Virtual currencies seem to be the way of the future. It offers decentralized freedom from both greedy governments and handsy financial corporations who are ready and willing to take your hard-earned money.

Even though this is a common sentiment among crypto enthusiasts, these very same users are actually using centralized exchange platforms to keep their money. It may not be the bank holding their funds, but those funds are still being held, only now by the operators of the exchange.

An additional threat to these centralized exchanges are hackers. Security breaches have been reported by many well-known exchanges, including Bitfinex, and more recently, NiceHash.

As crypto’s popularity and adoption grows, so too does the need to have a safe and secure decentralized method to convert your fiat to crypto and vice versa. Blockchain seems to be the answer as its completely decentralized, which is one of its selling points, which will allow users complete control over what happens to the funds.

A beneficial by-product of the Ethereum blockchain, and essential in offering this solution, is the smart contract. These contracts automatically release payment when certain pre-determined conditions are met. Its definitely a great option for businesses to streamline the traditional paper contract process. However, its also a great way to simply trade crypto. You could set up a smart contract between you and a seller without necessarily using a centralized exchange.

These contracts are also used by a number of start-ups in their ICOs. These entrepreneurs are offering tokens to investors, who would then trade said tokens through the use of a smart contract.

There are many platforms out there who are currently working towards building a smart contract-based system where traders can transact in a decentralized setting. There would be no need for an exchange as the smart contract will complete the successful transaction.

EtherDelta is one of these platforms and accounts for approximately 4% off all Ethereum transactions.

However, there are some disadvantages to a decentralized exchange platform, not least of which is the fact that it is extremely user unfriendly. It also has a slower operational speed and has unique security weak spots.

A major drawback though is scalability. Case in point is CryptoKitties, a game which makes use of smart contracts. Most people, probably including the Ethereum team, didn’t foresee just how popular the game would be. So popular in fact, that it essentially crashed the Ethereum network.

Will Warren, co-founder and CEO of 0x, stated that even if it’s not through the Ethereum blockchain, a new technology will come along that will power a “globally accessible financial network”. If this is the case, decentralized exchanges will be essential. 0x, according to their site is “an open, permission less protocol allowing for ERC20 tokens to be traded on the Ethereum blockchain”.

So yes, it does make sense that cryptocurrencies should be traded in a decentralized environment, but only once said environment can handle the widely predicted and anticipated mainstream adoption of virtual currencies.