OK, I cannot find an explanation of how a decentralized exchange would work in this thread. The OP said it works by magic. lol
Seriously though, I don't really see the need for a decentralized exchange if we have a Pricecoin that monitors price of Bitcoin (and possibly other fungible commodities) and algorithmically analyzes price fluctuations, then exchanges would be used for trading, but not leveraged speculation and HST. I think it would boost price confidence and utility of cryptocurrencies.
Having a mechanism of price discovery is only part of the issue. So you know BTC is worth $2.25 USD. OK now you want to trade so what do you do? Use Mt Gox? If so then it doesn't really matter what your external price discovery system says BTC is worth what matter is what the bid is on Mt. Gox. Oh yeah and to avoid the up to 3 hour delay waiting for funds to be confirmed you likely keep all your funds on the exchange hence all your fiat and all your btc are always at risk of theft, fraud, and loss.
then exchanges would be used for trading, but not leveraged speculation and HST.
What makes you think that? The money would be concentrated into a handful of exchanges and nothing would change. The external price discovery would be mostly ignored. Who cares if the external price says BTC is $2.25. If you are a merchant and the current ask on Mt. Gox is $2.18 then for all intents and purposes that matter the price is $2.18. Period.