Best decentralized exchange

03.11.2021 17 2016
Best decentralized exchange

Types of Crypto Exchange

Reasons for decentralization

Why People Need Smart Contracts

How Do Decentralized Exchanges Work?

Networks Of Exchange

Best Decentralized Exchanges

A Piece Of Advice For Further Exploration

The Final Word

Frequently Asked Questions— FAQ

 

Cryptocurrency is gaining huge popularity in the age of futuristic technologies. Some people have jumped into studying digital currencies, and others still treat them skeptically and do not decide to get their own crypto wallets so far. This is an explainable choice: people are used to the fiat currency and are not ready to give it up in favor of "decentralized finance" — not everybody still understands what "decentralized finance" actually is and why it should be preferred over fiat currencies. And yet, more and more people take a risk and decide to invest in the crypto market.

 

In 2021, when crypto space might be considered relatively developed (and is still swiftly developing), and when more and more cryptocurrencies appear in the crypto world, in order to exchange them, people developed a number of crypto exchanges that serve to buy and sell digital currencies.

 

In this article, we will cover a range of various crypto exchanges: which of them deserve your trust, how they operate, what necessary details you have to keep in mind, and other peculiarities to consider before dealing with the cryptocurrency exchange.

 

Types of Crypto Exchange

Before we move to the discussion of the actual crypto exchanges, we have to point out that most exchanges can be divided into two types: centralized exchanges and decentralized exchanges. And though the topic of the article is "best decentralized exchanges", we still believe that a curious reader might (and should!) wonder what centralized exchanges are. Let us get to the point.

 

In general, centralized exchanges function the way banks do. They serve as an intermediate between users while those buy and sell currencies. In other words, a person creates a crypto exchange account that operates just like a bank account, and we are used to trusting our bank accounts because they are safe.

 

However, the situation is not that simple. When you keep your currencies on the centralized exchanges, they do not directly belong to you — just like with money. In a sense, they are yours, but not really, because the bank might take them into circulation and accidentally lose them. Of course, this does not happen frequently, but such cases have occurred. A centralized exchange that figuratively "owes" the crypto might be attacked or might disappear, and then you will never see your crypto assets ever again.

 

But people still consider a centralized exchange to be something trustable and reliable. While? The reason is that they are safe when it comes to the actual trade and making the deals. You most likely will not be cheated by some scammer on a platform like that — the platform is interested in trustworthy users. That is why your account will definitely receive the amount you bought, or, alternatively, you will definitely receive the money you earned from the exchange. But, as we already stated, because of the fact that all the currencies are kept "within" the platform, it is a great target for hackers.

 

This is one of the main drawbacks of centralized exchange platforms. Usually, they are easy to hack, and once hacked, huge sums can be lost. This is something centralized platforms cannot do with — this is just the way they function. But, for ordinary users, this is not the only issue to be bothered about.

 

These platforms can just disappear. And nobody will get their crypto assets back. Even if you had a small amount in your wallet, losing something that belongs to you is never a joy. And you will never find a responsible person who might be punished for it. Neither will you get your money back — sad story, isn't it?

 

Reasons for decentralization

That is why more and more people are choosing decentralized exchanges. Nowadays, there are multiple decentralized exchanges, but these platforms have a complicated path of development. At first, a decentralized trading platform was not considered to be a safe place, and not because of the frauds, but because of the fact that people could lose their assets if they made a mistake, even a small one. But now, decentralized exchanges have become much more intuitive, and people do not lose their money for silly reasons.

 

The main difference between a centralized exchange and a decentralized one is that the latter does not have a third party that controls the assets of other users — in a sense, users control the transactions by themselves, and this is a huge step forward in the process of cryptocurrency exchanges. Now, nobody has access to your assets besides you.

 

Also, decentralized exchanges are more reliable and safe when it comes to fraud. The reason is that people came up with the idea of smart contracts — a solution that became revolutionary for crypto trading.

 

Why People Need Smart Contracts

If you are at the beginning of your crypto trading path, you might not know that smart contracts are. Or, you could have heard of them but never plunged into the topic. This is just fine — we are here to explain the peculiarities of this idea.

 

In simple words, a smart contract is a program or algorithm that allows completing the deal only if some specific conditions are met. Using the programmer's language, the code of such an algorithm contains the line that goes as "if... then..." or "when... then...". Put it simply: "if the red button is pressed twice, the red light turns on" — but in terms of the crypto exchange.

 

On a decentralized exchange, conditions are, of course, not connected with the red buttons. In real smart contracts, such conditions might cover releasing money to a certain party, or registering a vehicle, or, say, sending notifications. If the program sees that all the required conditions are met, it permits the transaction to be completed.

 

Smart contracts have become an indeed smart solution in the process of trading. The reason is that this technology allowed better safety and better timing of the operations. Now, nobody except for the two parties involved (a buyer and a seller) has access to the operation, and nobody can steal money on a decentralized exchange.

 

Besides, since now there is no need for the intervention of the third party, the time of a single operation decreased — transactions became much faster, which is a definite advantage of the decentralized exchanges.

 

How Do Decentralized Exchanges Work?

Decentralized platforms, in general, have a common approach in functioning. Imagine you have some cryptocurrency tokens, and you want to sell them. Let us figure out what you have to do in this case.

  1. the contract

As a seller, you are interested in the reliability of the buyer. That is why you set the conditions that have to be met in order for the deal to be completed.

  1. the order

As a seller, you have to specify how many units you are ready to sell. Or to which currency you would like to change them. Also, you have to point out what is the price of a single unit and for how long you expect the bids to go.

  • Biding time

 

Now, other users have a chance to get the offer. When the time is over, you can start an exchange process.

 

As you see, the process is simple as it sounds. No complicated steps are involved. With no central authority, crypto investors manage to perform multiple exchanges a day.

 

What about fees?

But, just like the centralized platforms, even the top decentralized exchanges charge trading fees. A trading fee on the crypto language is a commission that you pay in order to facilitate the trade. In the case of the decentralized exchanges, they charge so-called "gas fees". Gas fees are called this way because these fees are paid in order to compensate the expenses on the power and energy of the platform while processing the transaction. Usually, gas fees are relatively small, and the exact number depends on the platform. However, in general, gas fees vary from $0.05 to $1.

 

What you also have to be ready for is anonymity. Decentralized exchanges do not contain the names of the participants of transactions since there is no verification required. Your identity is not much of an interest for platforms like that — and, quite often, traders do not really care about the names of each other.

 

The last point to cover in this section is liquidity. Liquidity refers to the ability of the asset to be exchanged and converted into money, producing no effect on the price of this asset on the market.

 

Networks Of Exchange

Before we move to the actual discussion of the best decentralized platforms to buy crypto, sell it, and earn passive income, we believe it is essential to tell you about some networks that are used to make decentralized exchange possible. In this section, we will cover the Ethereum network, Polygon, and Binance Smart Chain.

 

1. Ethereum

Even if you are far from the world of cryptocurrency, have never heard of the private keys and their necessity, and have never practiced margin trading, the chances are that you still heard of Ethereum. Nowadays, this is the second popular cryptocurrency (after Bitcoin). Under Ethereum, people also understand a blockchain network, where this currency circulates.

 

So, in other words, the Ethereum network is a technology, space, whatever you call it, with a decentralized nature, where people trade their assets using the notion of a smart contract. Now, this is one of the most widespread networks allowing decentralized platforms to function. However, there are alternatives to it that are also worth discussing.

 

2. Binance Smart Chain

If Ethereum is such a convenient network, why would other networks appear? Why do people even need these "alternatives" if a great solution has already been developed? The truth is that Ethereum indeed has some drawbacks that Binance Smart Chain and Polygon developers tried to fix.

 

Ethereum is known for higher transaction fees and slower transactions. Its scalability also leaves much to be desired. That is why Both Binance Smart Chain and Polygon are sweepingly gaining popularity nowadays.

 

Binance Smart Chain, also referred to as BSC, runs parallel with Binance Chain (BC), and this parallel run allows users to enjoy the best of BSC (smart contract functional) and the best of BC (higher transaction capacity).

 

With a total market cap of almost 50 billion dollars, it has a price of the token equal to 316$. It suggests lower fees than Ethereum does — platforms using this network have a trading fee of $0.03. BSC is considered to be interoperable, and more than 700 projects have already adopted it.

 

3. Polygon

The last but not the least network to be discussed in this section is Polygon. It has less spread among programmers and developers, and yet, it is a worthy rival in this battle of networks.

 

Polygon is an embodiment of the fight against high trading fee conditions. It suggests a trading fee equal to $0.00004. Just like BSC, it is interoperable, and more than 150 projects have already adopted it as a network base.

 

Some time ago, Polygon was called Matic Network; however, due to its development and rebranding, it changed its name, which is now significantly more recognizable. Users claim that it has the simplest framework and user-friendly interface, with the help of which creating blockchains became as simple as they have never been before.

 

Best Decentralized Exchanges

In this section, we will cover several examples of the top decentralized exchanges on the market today.

 

1. SushiSwap

The first platform to cover in this section is SushiSwap. This is a new service that appeared in 2020 but has already gained popularity among traders as one of the best crypto exchanges. Sushiswap exchange uses the Ethereum network to swap tokens. The process is completely decentralized and does not require the control of a third party.

 

The service also suggests its own tokens — SUSHI — and it motivates people to buy them by providing them with a possibility to affect the platform's functioning. All they have to do is to vote on the proposals. These proposals are created by other participants-SUSHI holders. The entire platform was created by anonymous developers, and the only available information was that they called themselves "Chef Nomi''. One day Chef Nomi removed the funds from the liquidity pool of the platform, and this was a huge mess. Luckily, the funds were brought back, and none of the liquidity pools suffered again.

 

By the way, let us briefly discuss the notion of liquidity pools. If you have never heard of liquidity pools, we are here to enlighten you. A liquidity pool is a set of cryptocurrencies displaced in a smart contract. These currencies (or tokens as well) are used to facilitate decentralized margin trading. Liquidity pools are used when it comes to decentralized markets instead of traditional ones.

 

The entire DeFi market functions via an automated market maker, which stands for the absence of external control and for the transactions without permission.

 

Liquidity providers

 

You might be wondering where these liquidity pools get their tokens and cryptocurrencies. The truth is that there are people called liquidity providers. A liquidity provider is a person that allows one's resources to be added to the general pool to stabilize the platform. Liquidity providers also get benefits from it — they earn passive income on their deposit funds. The entire process is called liquidity mining. In simple terms, liquidity mining is the strategy of the platforms to engage a liquidity provider in filling the pool.

 

But let us get back to the SushiSwap service. It has a transaction fee equal to 0.3% of the transaction value. A great thing about the platform is that there are no withdrawal fees (fees that you pay to get your money from the wallet directly in your arms), but you will have to pay a fee if you decide to get your assets from the local wallet to the external one.

 

Users claim that the SushuSwap crypto exchange is rather attractive. It has a minimum of unnecessary details, and the design is rather intuitive. The interface is as easy as it was developed for a little kid. That is why SushiSwap is considered to be one of the best crypto exchange services now.

 

2. Uniswap

Once we mentioned SushiSwap, it would be unfair not to mention the Uniswap exchange platform where you can buy crypto and sell it. DEX market is often to blame for low liquidity — Uniswap strives to fix this situation by providing the liquidity pool. There are also liquidity providers that add their assets to the pool thus facilitating the trade.

 

This platform was developed two years before the SushiSwap, in 2018, and became something like a "role model" — figuratively, of course. But SushiSwap developers indeed used the code of Uniswap to create their service. Uniswap also functions on the ethereum network, which makes cryptocurrency exchanges simple and reliable.

 

As for the trading fees, there is a fee equal to 0.3% of the transaction. The trading volume of Uniswap might be envied — in June 2021, it was $337 million.

 

Uniswap is known for ease in use, as you do not require to pass any verification procedures. That is why it is especially liked by the newcomers in the field. With Uniswap, it is easy to start your trading path and begin to swap tokens. Besides, it suggests a broad range of tokens to exchange.

 

Keep that in mind

 

The only thing you have to be cautious about is fake coins. Since the platform is decentralized completely and requires no verification of the identity, some people start selling coins that are created by scammers and bring nothing but total disappointment in the end.

 

And yet, if you follow the basic rules of self-protection and trade wisely, you will be completely satisfied with Uniswap — one of the leading exchanges with no central control.

 

3. 1inch Exchange

1inch is not a usual exchange space like those we discussed above. The difference is in its nature: 1inch is a so-called aggregator that analyzes various platforms and suggests the best options for your exact trading pairs.

 

And though there is no fixed transaction fee charged on this platform (withdrawal fees or deposit fees are also not charged), there are still transaction fees on the platforms 1inch suggests. So, you should keep in mind that a trading fee is waiting for your move on the market.

 

1inch is a truly helpful tool if you want to compare the suggestions of other services. It searches for the perfect solution through more than 50 exchange options, and this is the reason why you can trade a broad variety of tokens using this instrument.

 

If you are a newcomer in the field, using 1inch might seem to be slightly complicated for you, especially if you have no experience at all. But, all you have to do is spend a couple of minutes figuring out what stands for what in the interface. Once you have chosen the network of the exchange (ethereum, Polygon, or Binance smart chain), you can move to connect your wallet. You can do it with the help of the corresponding application.

 

The last step is to figure out which trading pairs you are interested in and select the most efficient option for you!

 

4. Curve Finance

One more option to consider in this section is Curve Finance. Curve Finance (sometimes called Curve.fi) is a decentralized platform that allows exchanging stablecoins. Under stablecoins, people usually understand those coins which are stable in price. They have been artificially created this way to support the market because ordinary crypto coins might fluctuate in price since they depend on the market changes.

 

This platform is an aggregator, just like 1inch exchange, but it has a different nature. It allows its users to participate in filling various liquidity pools, thus increasing their passive income. The Curve is a decentralized platform, and no one but users themselves can control the operations here. The trading fee constitutes 0.04% of the transaction value.

 

Curve suggests a wide range of coins to be swapped here. But if you are a newcomer, using this platform might seem to be quite a complicated process. A nice feature is the design of this platform — something like a site of the 90s, performed in a retro style. It brings the feeling of nostalgia to those who witnessed the beginning of the spread of the Internet back in those times.

 

But, despite the fact that this site looks rather attractive, it is still not really intuitive. If you have little experience in "communication" with such platforms, you might face some troubles figuring out which buttons are responsible for which operations. In other words, you will have to spend some time understanding its functionality.

 

5. PancakeSwap

PancakeSwap is a platform that uses BSC in its functioning. This is another "alternative" to Uniswap that, however, uses its code as the basis. It was born thanks to a group of anonymous creators, who, however, permit their users to control the functioning of the platform with the help of the CAKE governance token. CAKE token is a token of this PancakeSwap platform that appeared in 2020 but gained huger popularity in 2021. Its main purpose is to control and facilitate the liquidity of the service.

 

As for the fees PancakeSwap charges, you will meet a fee of 0.2% per transaction, which is relatively small (remember it is powered by Binance Smart Chain that "fights" against too high fees). Besides, you will not meet any withdrawal fees here, which is also an attractive feature of the service.

 

Users share the opinion that PancakeSwap is one of the most straightforward platforms available nowadays. It is not a surprise that beginners often choose it as an instrument for the token swap because the interface of the platform is indeed user-friendly. You will not have to spend hours trying to understand how to use the service — and attractive and intuitive design will do a good service for you.

 

However, there is one complicated moment for swapping and trading here. It concerns the exchange of ERC-20 tokens to BEP-20 tokens via Binance Bridge. For the beginner, it will take slightly more time to figure this point out.

 

6. Bancor

Bancor is now considered to be one of the most popular decentralized platforms for crypto exchange. It has its own history with ups and downs, but in 2021 it is still one of the most usable and convenient services to swap tokens.

 

The platform has its own token — the BNT token. With a Bancor wallet, you can swap currencies and tokens without waiting for the second party to participate in the deal.

 

Users claim Bancor to be a user-friendly space with a rather intuitive design. There you can easily create smart contracts to enhance safe and secure exchange. In other words, newcomers in crypto trading might not be afraid of interacting with Bancor — it will not take a lot of effort to figure out how to use the service and trade tokens here.  The platform is famous for the number of token pairs represented here. With your local wallet, you will get a chance to deal with more than 8.5 thousand pairs — a rare platform that can offer similar features.

 

Bancor is a relatively old platform — it was developed in 2016. And though it has been only 5 years since then, in the world of cryptocurrency, it is the whole eternity. Nowadays, it remains to be a reliable tool for token swapping.

 

As for its token, BNT, it was developed in 2017 and fluctuated in its price quite drastically. Its "best times" were when one unit of this token cost slightly more than 10 dollars, and its worst time was at the price of less than a dollar! Now it has a price of approximately 4 dollars per unit. This token is represented not only on the Bancor platform (obviously) — you can also meet it on Binance and Coinbase, for instance.

 

So, if you are just at the beginning of your way, you might not hesitate to choose this platform for trading.

 

A Piece Of Advice For Further Exploration

Now you know much more about decentralized platforms for the exchange of crypto and tokens. No matter if you are new in the area or an experienced player, there are some rules to be followed in the crypto space. Basically, these rules should better be called "pieces of advice" since everyone has the right to choose a trading strategy and the way he or she distributes one's assets.

 

And yet, we feel responsible for our readers, that is why we collected several points for you to keep in mind.

 

  • Do not share private keys with strangers

 

Your private key is the thing that provides access to your assets. If you do not want to lose access to your funds, you should keep them secret from potential ill-wishers and people you do not know in person. Sometimes scammers introduce themselves as someone from your life — do not fall for that. Contact the person you are planning to provide your personal information with. This is the basics.

 

  • Be attentive when sending assets

 

When you are sending assets to another person during the deal, check the address, just in case. If you accidentally send assets to an unknown address, the chances are that you will never see them again. This is like a bank transfer — the wrong recipient's details might lead to money going somewhere, not to the place they were supposed to go.

 

  • Avoid scammers and everything that looks like a scam

 

Of course, this might sound obvious, but if something looks "too good to be true", chances are that it is a scam. Nowadays, scammers might not only steal money from your credit or debit card but also get access to your crypto funds if you are not responsible and cautious enough. They might suggest you invest in a new cryptocurrency or give recommendations on how to "increase your income" — in these cases, try to finish your communication as soon as possible.

 

  • Do not buy everything that has low costs

 

Sometimes cryptocurrencies experience hard times of the price fall; even the most "reliable" currencies do. Very often, this situation can be fixed — and is fixed after some time. But sometimes, the price falls for a reason, and it might not reach its "best level" ever again.

 

That is why we strongly recommend analyzing currencies you are planning to invest in. Check the predictions of the secure sources and analysts, do not make purchases in a hurry.

 

  • Do not invest everything you have

 

The idea seems to be attractive — you invest a lot, and then you get even more. Well, in crypto reality, it is not that simple. If you invest all your funds into a currency and then it dramatically falls in the price, you will definitely get into a stressful situation. To avoid such consequences, spend just a part of your assets on crypto investments. And do not forget to invest wisely — this is the key to success in crypto trading.

 

The Final Word

Decentralized platforms for trading: be it margin trading, spot trading, any kind of trading — have become a real salvation for retail investors and fund managers. On-chain liquidity protocol that enables the automated exchange of tokens, suggested by many of the platforms nowadays, is something people cannot imagine their life without in 2021.

 

And though platforms vary in their trading volume options, fees they charge for transactions, and the number of tokens they suggest for swapping, all of them contribute to a bigger issue: cryptocurrency market development. Investors, satisfied with the interest paid to them in the process of trading, are not ready to give up on this initiative anymore. This fact demonstrates that decentralized exchanges must be present in the crypto market today.

 

Frequently Asked Questions— FAQ

 

Are decentralized exchanges safe?

Decentralized exchanges are indeed safe, much safer than their centralized opponents. The decentralized nature of the platform implies using a smart contract — a technology that allows users to perform transactions without the involvement of a third party. Now a buyer and a seller have total control over the operation — to complete the deal, they have to make sure all conditions required by the contract are met.

 

Which is an example of a decentralized exchange?

A decentralized platform for exchange is one that has no control from the "third party" — on such platforms, and people control their operations by themselves. To do it, they use smart contract technology — this is a safe and secure way to protect assets. There are numerous examples of decentralized platforms. The most popular of them are ParaSwap, Uniswap, PancakeSwap, 1inch, Bancor, and many others.

 

Are there any decentralized crypto exchanges?

Nowadays, the crypto market cannot exist without the help of decentralized exchanges. It is always up to you which trading platform to choose, but platforms with no central control seem to be more reliable because of the fact that they cannot be easily attacked by hackers. The best decentralized exchanges use smart contract technology to let their users control operations on their own — that is why transactions on such platforms are safer and quicker.

Top articles
03.11.2021 13 2163
Most expensive NFT
03.11.2021 9 1875
Crypto Punks