If you are a cryptocurrency trader, chances are you have come across top centralized exchanges such as Binance or Coinbase. Today, however, Decentralized exchanges are also gaining in popularity.
Although they are not as widely used at the moment as might be expected, it is quite clear that they made an impression. The reason is also that the currently popular centralized exchanges are a remnant of one classic problem with conventional financial systems – they are managed by a central body.
The exchange will become the manager who holds your assets as a market maker. It ensures that users are willing to sell assets to buyers or vice versa. The functions of CEX include custody of assets, securing liquidity, etc. They also have headquarters and boards of directors. Peer-to-peer trading can be performed with decentralized exchanges. Instead of a central authority, they are managed by software and users. DEXs also do not require Know-Your-Customer (KYC) processes, such as identity verification, address verification, receipt information, and more.
To specify this, decentralized exchanges are automatic or at least operate semi-automatically. Users on the platform are directly involved in important decisions. At the same time, it has a distributed ledger for storing and processing all data. At the same time, the platform does not store any personal data, because it exists only as a tool to enable trade.
So let’s take a look at
The best decentralized exchanges in 2021
Uniswap, built on Ethereum, is a leading decentralized exchange that provides opportunities for many users. DEX is designed to act as a crypto-community platform for token trading without additional intermediaries. It is also unique in that it uses a mathematical equation and pools of tokens to execute trades. With a 24-hour trading volume of $ 1,241,070,580.19 at the time of writing, it is at the top of our Top 5 Decentralized Exchanges of 2021.
PancakeSwap uses the Automated Market Maker (AMM) structure as DEX. No order books, bid systems or limit / market orders are included in this structure. Instead of these methods, users trading on the platform obtain liquidity from liquidity pools. Once the trade is completed, the balance of the liquidity pools is restored. New rebalancing is performed by subtracting liquidity from one pool and adding to another. Its trading volume for the last 24 hours is 967,719,199.26 USD.
1inch Liquidity Protocol
This Unique DEX is a new generation automated market maker (AMM). It protects users from front-running attacks and also offers liquidity providers capital efficiency. Most importantly, it ensures that merchants can buy and sell ERC-20 tokens without being affected by slippage. The 1inch algorithm captures the value that provides liquidity providers with the best returns. At the time of writing, the trading volume of DEX is $ 569,487,291.59.
Raydium is based on Solana’s blockchain and works as an automated market maker (AMM) and liquidity provider. Unlike other AMMs, where liquidity is exclusive to their own platform, Raydium provides on-chain liquidity to the central Serum DEX orderbook, which is also based on Solana. With Raydium, users can trade through orderbooks or AMMs, participate in liquidity extraction or stack RAYs (its native token) to participate in token sales and earn rewards. Currently, its volume for the last day is 390,061,083 USD.
SushiSwap is software that runs on the Ethereum blockchain. It provides incentives to users who run its cryptocurrency trading platform. Like others, DEX uses a number of liquidity pools for cryptocurrency. Users first lock assets into smart contracts, and traders then buy and sell cryptocurrencies from these pools. Users who own its native token, SUSHI, have permission to decide on the platform. It has a 24-hour trading volume of $ 374,799,608.61.
Not having a third party in the middle is great, but users will need to be careful when trading. DEX will not help with a forgotten password or data loss due to a missing KYC.