What would a decentralized way to buy BTC for USD/whatever look like? That sounds like a nightmare to design without a trusted 3rd party because you're mixing reversible and irreversible transactions.
Another would be to only store the centralized currency, and only facilitate transactions. So the person with USD deposits USD into the facilitator's account and provides a Bitcoin address to the facilitator. When the person with Bitcoin decides to make the trade, they make a Bitcoin deposit to the facilitator's account. The Bitcoin deposit automatically gets forwarded to the person who deposited the USD, and the USD gets forwarded to the person who had Bitcoin.
At no point in this transaction does the facilitator store Bitcoin.
Wouldn't that require the escrow agent (your facilitator) to either only make deals between active users (so that they can sign the transfer transaction from Alice [selling] to Betty [buying]) or for the escrow to have some multipart key with Alice that has a blank recipient address? I'm not sure we've gotten away from the escrow/exchange storing BTC there and it sounds like a very unliquid marketplace.
Yes, it would require deals to happen between active users. This does to some extent reduce liquidity, but I am skeptical that such liquidity is more valuable than security from having all your money stolen.
