Decentralized exchanges seem to spring up whenever we have a hacked exchange. The considerable number of DEXes has made it challenging to find the best one to conduct your trading. All decentralized exchanges seek to execute the same task carried out by centralized exchanges. However, the major difference is that DEXes have no central authority, unlike centralized exchanges.
These DEXes offer much more in regards to security and anonymity, and they do this by trading away speed, pair variety, and sleek interference. The threat of hacks is a big deterrent to trading cryptocurrency on centralized exchanges. However, there are only a few exceptions. So many malicious agents have managed to gain access to various centralized exchanges to extract critical user information and also steal away funds.
We are all paranoid about ensuring we don’t lose our cryptocurrencies to malicious attacks on centralized exchanges. Incidents like the Mt. Gox hack, Bitfinex hack, etc. has created more fear in the mind of crypto enthusiasts. It is this fear that has to lead to the high demand for decentralized exchanges. In this post, we shall be exploring top DEXes. However, this list is in no particular order.
Top Decentralized Exchanges For Your Crypto Trading
Uniswap is DEX that runs on the Ethereum blockchain, and it allows you to carry out decentralized token swaps. You can swap ERC-20 tokens on Uniswap without having to trust anyone with your money. Meanwhile, the platform allows anyone to lend their cryptocurrency to outstanding reserves known as liquidity pools. In exchange for providing money to these Uniswap pools, you earn fees on the DEX platform.
To be more precise, Uniswap is an automated liquidity protocol without an order book or centralized authority required to make trades. It allows you to trade without intermediaries and censorship-resistance. Without an order book, Uniswap works with a different model that involves liquidity providers creating liquidity pools. The system offers traders a decentralized pricing mechanism that essentially smooths out order book depth. Therefore, you can swap between ERC-20 tokens without the need for an order book.
for a clarity on how to use Uniswap, you can check the link here.
Changelly is arguably one of the top decentralized exchanges that allow crypto traders to exchange cryptocurrency without the need for KYC or AML. The transaction is done almost instantly without any form of intervention by any entity. To get started, you to the Changelly site, select the coins that you would like to exchange and provide your wallet address. The Changelly DEX handles the rest and ensures you have your coins in the provided address.
On the Changelly platform, traders select the crypto pair they would like to exchange, but they have to ensure they accept the best rate on the market. Traders pay 0.25% service fee on the Changelly DEX.
3. Binance DEX
You must have noticed that most of the current DEX platforms leverage the flexibility of the Ethereum blockchain to attain their goals. Binance DEX is developed on the Binance Chain. Meanwhile, it has low latency, high throughput, low fees, and UX similar to centralized exchanges.
Upon their launch, the original ERC-20 Binance exchange tokens (BNB) were burned. These BNB tokens were then systematically replaced with BFP-2 format tokens using the Binance Chain. The network is managed by elected validators who produce the blocks.
Bisq is another decentralized crypto exchange. The users of Bisq exchange Bitcoin for fiat without exposing their personal information. Bisq is an open-source desktop application that is built and sustained by developers across the world. It ensures that no single component of the software is centralized by leveraging Tor routing, local computing, and wallets.
However, these features have made trading on the Bisq platform a little slower than other decentralized exchanges. Users manually search for orders in their preferred national currency and other non-crypto payment methods.
5. Airswap Protocol
This is another DEX that is built on the Ethereum blockchain. Airswap neither charges fees for trading, nor do they require users to divulge their personal information before trading. The off-chain activity in Airswap is carried out through a lightweight peer discovery engine. It is the job of the engine to ensure that there is a real intent to buy and sell specific assets on the platform.
Once a user establishes a trading partner, both parties will negotiate the price for the digital asset in question. When a price cannot be agreed upon by both parties, the parties involved must then query an oracle. According to the Airswap whitepaper, the oracle provides pricing information that helps both the Maker and the Taker make more educated pricing decisions. The Oracle also helps to smooth the process of trade negotiation.
6. 0x Protocol and Relayers
It is a general-purpose DEX that is built on the Ethereum blockchain network. All the tokens are ERC-20. Some gaming projects like Gods Unchained and others in the DEX space all make use of the 0x protocol to build their products. There are about six notable DEXes that are built on 0x. You will need to understand the architecture of the 0x protocol.
0x provides centralized databases known as Relayers to help improve the scaling problem of Ethereum. The job of Realyers is to mediate activity between users before interacting with the Ethereum blockchain network. For example, it could be matching orders between traders. Some of the DEXes using 0x include the likes of LedgerDEX, DDEX, ERC DEX, etc.
This decentralized exchange model is unlike the other DEXes in that it doesn’t necessarily require a second party. You can exchange your ERC-20 token for the Bancor’s native “Smart” Bancor Network Token (BNT). BNT holders can then exchange these for other ERC-20 tokens. You can store any ERC-20 tokens on the Bancor protocol through a smart contract. The fact that BNT is Ethereum-compliant means that its value is backed by every other ERC-20 token held in different smart contracts. The value of the BNT token is automatically adjusted with regards to these other tokens.
It is one of the most popular DEXes we have on this list. As a user, you can manage your fund through IDEX’s Ethereum based smart contract. There are four ways through which you can open a wallet at IDEX. You can do it using a MetaMask, a Keystore file, by manually entering private keys, or through a Ledger Nano S.
Once you are connected as a user, you can only move your funds over to the exchange using any of the four wallets. Once on the platform, you can view trading pairs as well as the status of different order books. Such interface gives users the ability to set up market/limit orders on the platform. Similar to centralized exchanges, the order book is also updated in real-time. It means that IDEX is relatively efficient when matching buyers with sellers.
Decentralized exchanges are undoubtedly the future of trading and digital asset management. The potential of DEXes is enormous, and we can only imagine how it will revolutionize the future of trading in the crypto space. Irrespective of the current state of DEXes, the future looks very much promising.
Okereke has a passion for researching blockchain and cryptocurrency. He enjoys creating long form educational content to inform others on the opportunities in this space.