DEX aims to operate on the same scale as the centralized alternatives, but already offers much more in terms of security and anonymity.
In 2020, DEX became one of the growth drivers of the cryptocurrency market. The trading volumes of the decentralized exchanges at one point surpassed those of the large centralized exchanges. For example, the turnover of the largest DEX Uniswap last month amounted to more than $30 billion.
What is a Decentralized Exchange?
A decentralized exchanger is a digital asset marketplace that does not depend on third parties or organizations to hold customer funds.
Instead, the platform offers a direct peer-to-peer trading mechanism that allows users to process their transactions in an automated system.
This type of exchange works on proxy assets or through an escrow system with multiple signatures or tokens (digital assets that represent certain cryptocurrencies or fiat currencies).
Requirements for a decentralized cryptocurrency platform
For such a trading platform to work optimally, it is important that the following conditions are met:
Sufficient number of users: To ensure there is no price manipulation and high liquidity, an exchange must have a large customer base.
High transaction speed: cryptoasset price changes often occur within seconds or minutes. For this reason, traders should be able to place orders and execute them as soon as possible.
As few trading pairs as possible: A stable digital asset exchange should have a minimum number of cryptocurrency pairs so as not to open up opportunities for arbitrage.
User-friendly interface : The usability of a service largely depends on its interface.
Scalability: Exchanges must have the right technology in order to be able to handle large volumes of trade without undue burden. In the event of a sharp increase in trading volumes, the exchange should be able to deal with this, and not slow down or stop its work.
Affordability : An efficient exchange will offer its investors the most favorable trading conditions. To do this, she needs to find a balance between offering sustainable transaction fees and generating adequate income.
Benefits of a decentralized exchange
Low Fees: Decentralized exchanges have very low operating costs and this allows them to contain their trading costs.
Increased security : In a decentralized system, users do not transfer control of their assets to a third party.
Easy to manage assets: The very logic of decentralized exchanges is to allow you to have complete control over your portfolio. This is more convenient compared to centralized exchanges, which require time-consuming deposits and withdrawals. In addition, most decentralized exchanges are e-commerce-friendly - they allow you to purchase products or services using exchange wallets.
Decentralized platforms also have low barriers to entry and favorable trading conditions. This allows them to grow dramatically in relatively short periods of time.
Disadvantages of DEX
Limited Pairs: An exchange does not allow you to directly exchange one coin for another, especially when the pair is not among the mainstream coins such as Bitcoin and Ethereum. Sometimes this forces users to convert their funds several times. Buying BTC or ETH and then exchanging them for other coins increases transaction costs.
Forward: DEX are developing their own buyer-seller matching methodologies. This technology will help prevent unconfirmed orders from being detected and disrupted by "outsiders" for quick profit.
Top-10 DEX
Here's a list of the top ten decentralized exchanges in 2021.
1• Uniswap
Uniswap is the most popular decentralized exchange. It allows you to exchange any ERC-20, create your own liquidity pools, track your share in the pool. Uniswap has very low gas prices (Ethereum fees) making it a very attractive place to trade.
Commission: 0.3%
Trading pairs: 2880
2• Curve
Curve is a decentralized exchange optimized for efficient stablecoin trading with very little slippage. Tokens also interact with external protocols.
Commission: reduced
Trading pairs: 23
3• Balancer
Balancer is a protocol market maker designed for programmable liquidity. The balancer is similar to Uniswap. It allows you to exchange Ethereum tokens in a very user-friendly interface without bids / requests, deposits, or order management. Investors can compare the liquidity of multiple pools to maximize their profits.
Commission: customizable
Trading pairs: 224
4• SushiSwap
The SushiSwap exchange allows you to exchange any ERC20 token for any other ERC20 token through automated liquidity pools.
Commission: 0.3%
Trading pairs: 78
5• dYdX
dYdX is an open source cryptocurrency trading platform that enables decentralized margin trading.
Commission: from 0% to 0.3% per spot
Trading pairs: 3
5• Binance DEX
The decentralized exchange has a minimalist and clean interface with TradingView charts. The exchange is built on Binance Chain, offering relatively fast execution times and low trading fees. On Binance DEX, unlike the centralized version of Binance, you do not need to deposit money, but you can trade directly from your crypto wallet.
Commission: 0.03% +
Trading pairs: 149
6• Bancor
A pioneer of Automated Market Maker (AMM) launched in 2017, Bancor is one of DeFi's oldest projects. Bancor is a well-known and important liquidity provider used by many DeFi aggregators.
7• Aave
Aave is an open source protocol through which users can earn interest on deposits and borrow assets. The native token LEND was created for lending to the platform.
Commission: 0.3%
Trading pairs: 42
8• Compound
Offers to borrow funds and lend them to other users in return for interest. Interest is paid in native platform tokens. COMP is an ERC-20 asset built on top of the Compound protocol.
Trading pairs: 21
9• 0x
0x is another open source protocol that allows ERC-20 tokens to be traded using smart contracts. ZRX is a native 0x token required to vote on improvement proposals. In addition, it can be used to place bets and receive rewards.
Commission: no
Trading pairs: 42
10• JustSwap
Just Swap is a peer-to-peer Tron blockchain platform that converts any TRC-20 token.
Commission: 0.3%
Trading pairs: 524
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