First, there was Bitcoin, then there were centralized exchanges, and then there was the big bull run of 2017, and now, we have decentralized exchanges! Ok, so we’ve glossed over most of the fascinating history of crypto there, but we’ve arrived together at our destination and the exciting topic of discussion for this piece: decentralized exchanges.
First of all, let’s start with this golden nugget of a question…
What are Decentralized Exchanges?
These crypto exchanges are often abbreviated to DEX and they offer many of the services of a centralized exchange (CEX), except they do so in a decentralized way, without a central authority. What this means is that DEXs are a great place for peer-to-peer trading, solving the problem that CEX has: custody of crypto. DEXs offer traders a way to trade their crypto without having the risk of losing it to an exchange hack (think of Mt. Gox). Many of these DEXs are well funded and thus have a lot of liquidity to offer users as well.
Where a CEX generally wins new traders is that it offers a way for users to turn fiat currency (dollars, pounds, etc) into cryptocurrencies (BTC, ETH, etc). Initially, there were no DEXs able to offer this service, but thanks to some clever innovations, it’s now possible on some exchanges.
How does a DEX work?
Designs and coding change from platform to platform, but overall the concept is basically the same; sellers and buyers connect thanks to a global liquidity pool. The main difference between a decentralized exchange and a centralized exchange is that liquidity and orders are aggregated by a centralized entity. This means that capital is collected by a smart contract with the help of an oracle.
What’s good about a DEX?
Here are our top 5 reasons why a DEX can be advantageous over a CEX.
- It’s cost-efficient to use a platform with minimal or non-existent trading fees, meaning traders can literally trade, instead of having to give a slice ‘to the man’
- Greater levels of anonymity protect the identity of traders, who can use their own wallets and do not need to register for the DEX with their personal information
- DEXs solve the custody problem by allowing users to hold and control their own tokens 100% of the time, which CEXs do not allow
- Trades made on DEXs are peer-to-peer (usually) and so the transactions should be made instantaneously and without delay
- High levels of global accessibility make them popular options for people whose country is experiencing certain crypto regulations
What are the most well-known decentralized exchanges?
In alphabetical order:
1inch.exchange is an aggregator DEX working to reduce or avoid high price slippage by collaborating with other exchanges including UniswapExchange, Bancor, and KyberNetwork.
Zero trading fees on this Ethereum P2P DEX, simply connect your Ethereum wallet and get started!
Secure and anonymous P2P exchanges of BTC, ETH, USDT and Tezos via a cool desktop wallet.
A non-custodial portfolio manager, only to be used for exchanging ERC20 tokens.
Bamboo Relay is also used for trading, lending, or borrowing ERC20 tokens, and also offers the capability for 0x and bZx.
Not as decentralized as some of the others on this list, however, it still allows P2P token exchange on Ethereum and other blockchains.
An open-source P2P desktop app for decentralized trading of Bitcoin, no registration required and BTC can be bought with fiat currencies.
Curve allows for very efficient stablecoin trading on the Ethereum network, simply connect your Trezor, MetaMask, Ledger, or Dapper wallet.
DEX.AG is something like a crypto marketplace slash comparison website, allowing users to compare rates across many different decentralized exchanges.
Built on Hydro Protocol technology, DDEZ is a decentralized exchange with real-time order matching.
This interesting hybrid Ethereum exchange has been designed to give access to a bunch of excellent features, including spot trading, P2P funding, decentralized trading, and margin trading.
Based on the Ethereum blockchain, dex.blue offers real-time trading of tokenized assets for P2P traders.
ERC20 tokens can be traded easily on this DEX, but it also offers some advanced features for traders, such as portfolio management tools and different ways to analyse the cryptocurrency market.
Fairdex is a very modern decentralized trading platform from the Netherlands, designed for ERC20 tokens and built on DutchX technology.
Most ERC20 Ether and Ethereum-based tokens can be traded directly between users on this decentralized exchange.
Users can trade freely between one another on this non-custodial Ethereum decentralized digital asset exchange, without ever having to relinquish a smither of control to a third-party.
This cross-chain exchange has a bright future due to its great application of atomic swap technology, allowing for great P2P trades.
Convert tokens directly from your wallet, instantly and seamlessly, from anywhere. This technology has great potential for developers.
Keep control of your private keys whilst being able to swap between BTC, ETH, and DAI with low fees and low risk, in a decentralized fashion. Also compatible with USDT and USDC.
Ethereum-based Loopring Exchange works as an order book system, simply connect your wallet and you’re good to go!
Crypto-traders who want diverse options and a mixture of quality sources will love this aggregator style DEX, which pulls liquidity from 0x Kyber, Curve, Oasis, Uniswap and more. Smart order routing is also available, simply connect your wallet and start trading in a simple fashion.
Those who value their anonymity will be glad to use Mesa, which is completely permissionless and even allows for ring trades, which maximise liquidity. Based on the Gnosis Protocol, their software is not only effective, it’s even open source.
Nuo is an open-source platform that enables users to efficiently perform margin trading actions by using smart contracts. Lending and borrowing are also enabled.
This is the world’s first EOS-based DEX and it enables users to trade EOS sidechain tokens.
The OasisDEX Protocol foundations of this platform allow for decentralized and non-custodial trades of certain tokens.
Whilst not predominantly a crypto trading platform, it is possible to trade digital assets such as cryptocurrencies. This platform is likely to grow in popularity.
This decentralized exchange aggregator is perfect for economical traders who are keen to find a bargain, as there are great prices pulled in from other Ethereum DEXs. Billed as a liquidity solution for decentralized platforms, it is an interesting bit of tech.
For traders who need a rapid service for their trades, Shiftly is one of the best, as it offers great immediate opportunities for comparison and ‘shopping around’.
Cross-chain swapping-enabled Switcheo is a great DEX that is compatible with EOS, ETH, and NEO.
The 0x Protocol base level allows Tokenlon to guarantee the prevention of trade collisions and front-running. Really easy-to-use and user-friendly.
Instantaneously allowing traders to automatically get the best prices on the DEX market (for ERC20 tokens) is one reason that this platform of convenience has massively grown in popularity over the last few year.
For traders investing, buying, and selling TRC-based tokens, TronTrade’s simple user interface is a great place to be.
One of the most popular and well-recommended exchanges on this list, Uniswap offers an Ethereum-based, automated, and decentralized set of services.
This Chiene EOS-based decentralized exchange offers high security from through its multi-signature smart contracts, which also enable decentralized asset custody.
Thanks to YOLO, EOS network traders are able to get one of the smoothest token swapping experiences in the DEX market.
dYdX is one of the most advanced platforms for financial products in the DEX world, designed with open-source protocols, allowing for decentralized margin trading of crypto assets.
The final DEX on this list is a RenVM powered exchange that protects the anonymity of those looking to mint their WBTC.
Whilst decentralized exchanges are something new and exciting for the crypto world, they also face certain hurdles. Without centralization, there are simply hurdles that users will face, and so DEXs must work twice as hard to grab attention, win support, and maintain a viable service.
What remains to be seen is how DEXs will adapt and innovate in order to win a greater portion of the total cryptocurrency sphere. As we’ve seen from certain DEXs on this list, one of the key aspects of their offering is versatility, which now not only means granting access to a variety of crypto-assets, but also a variety of other digital assets.