This paper describes a Direct Carbon-Air Fuel Cell (DCFC) which uses a molten hydroxide electrolyte. In DCFCs, carbon is electrochemically directly oxidized to generate the power without a reforming process. Despite its compelling cost and performance advantages, the use of molten metal hydroxide electrolytes has been ignored by DCFC researches, primarily due to the potential lack of invariance of the molten hydroxide electrolyte caused by its reaction with carbon dioxide. This paper describes the electrochemistry of DCFC based on molten hydroxide electrolyte and discusses means to overcome the historical carbonate formation. Furthermore, it describes the cell performance during the initial stage of a long term operation and discusses the causes for the initial cell performance degradation. To date, five successive generations of medium temperature DCFC prototypes have been built and tested at SARA Inc. to demonstrate the technology, all using graphite rods as their fuel source. The basic feature of the cell is a simple design in which the cathode is not traditional gas fed electrode type. It is a non-porous electrode structure made of an inexpensive Fe-Ti alloy and gaseous oxygen is introduced into the cell by bubbling humid air through the electrolyte. The cell successfully demonstrated delivering more than 50 A at 0.3 V with the current density exceeding 100 mA/cm2. Main feature of DCFC with hydroxide electrolyte is that the cell performance decreases over time mainly due to oxygen cathode polarization. There are three possible causes for this performance decay: Carbonate formation, electrolyte evaporation due to air bubbling, and corrosion products build up. In order to determine the right cause for the performance decay a series of experiments was carried out investigating various parameters involving cell temperature, water content in the melt, current density, carbonate content in the melt, melt level in the cell, air flow rate and intermittent on-off operation. DCFC was operating at constant current while cell voltage and electrode potentials were recorded over time. Results obtained indicated that the performance of DCFC with hydroxide electrolyte during initial 200 h is governed by the oxygen cathode performance that is mainly affected by corrosion products. The corrosion products catalyze decomposition of peroxide ions which are reacting species at the cathode resulting in an increase of cathode polarization over time. Effect of carbonate ions on the initial cell performance decay is insignificant as compared to the effect of corrosion product. Means to overcome the corrosion products issue were discussed.