We have helped you discover some of the great platforms we have discovered, but it would be wise to learn more about the importance of decentralized exchange (DEX). With a DEX you trade peer-to-peer without any middleman, thanks to blockchain-technology and its smart contracts.
Check out our collection of best decentralized exchanges and learn more about the importance of DEX.
Best Decentralized Exchanges 2023
 | ✔️ Advanced trading tools | ||
 | ✔️ Low trading fees | ||
 | ✔️ User-friendly Design |
About Decentralized Exchanges
Decentralized exchanges first entered the crypto-space back in 2014 but, it wasn’t until 2019 it really started to take both volume and liquidity from CEXs. Unlike centralized crypto exchanges, a DEX is runned by applications that use a range of smart contracts to enable tokens to be traded without a central intermediary. In short, decentralized exchange allows you to exchange tokens with other users, without any middleman.
How Decentralized Exchanges Work
Decentralised exchanges work by using automated market makers (AMMs) or smart contracts to process orders and leverage the liquidity provided by traders and existing liquidity reserves in the chain. The Smart Contract has a predefined agreement for the operation and execution of commands. Trades are exchanged via an order book in which users trade with other users by interacting with the Smart Contract.
In combination with a governance model, a DEX transfers ownership of its assets to its users. Traders and liquidity providers interact with the exchange through their crypto wallets and keep full custody of their assets. All transactions are defined and processed by intelligent contracts. There is no centralised company behind the stock exchange.
DEX Exchange Liquidity
Decentralised exchanges depend on the liquidity of their users, but do not have the same level that centralised exchanges have. A centralized exchange liquidity pool is owned by the exchanges, and they are filled with income creators who make their assets available to other traders. With a DEX however, the users and traders provide liquidity through the usage of smart contracts. Making decentralized exchanges completely independent and without centralized authority.
Fees on DEX Exchanges
One of the small disadvantages of such a platform is the transaction fees, which can be quite high compared to the best crypto exchanges. The reason behind this is due to most DEX being runned on the Ethereum network which as of late have suffered by high amount of activity on its network. However, if you use a decentralized exchange on i.e. Binance Chain or Cardano, fees will be much lower as its truly based on transaction fees of the network.
Anonymity on Decentralized Exchanges
A traditional central exchange such as Binance, for example, acts on your behalf as a custodian, but all trading takes place in the Binance database and not in the blockchain itself.
Decentralized exchanges are considered anonymous and secure exchanges that do not include personal authentication and KYC / AML compliance.
Unique Opportunities to Trade Tokens on DEXs
Centralized exchanges only support known cryptocurrencies or cryptocurrencies they allow to be exchanged on their platform. Because a DEX is completely decentralized, anyone can list their token on a decentralized exchange. By turning to decentralised exchanges, users can trade new and obscure cryptocurrencies that cannot be exchanged on a centralized exchange.
DEX FAQs
What is a Decentralized Exchange (DEX)?
A decentralized exchange, or DEX, is a type of cryptocurrency exchange that operates without a central authority. DEXes allow peer-to-peer trading of cryptocurrencies directly from one user to another. They are built on blockchain technology, which ensures transparency and security.
How does a DEX differ from a centralized exchange?
A centralized exchange is managed by a company or organization that oversees transactions. They hold users’ funds and personal information, much like a traditional bank. On the other hand, a DEX doesn’t hold user funds or personal data. Instead, transactions are facilitated directly between users through smart contracts on the blockchain, providing increased privacy and control over one’s funds.
Is it safe to trade on a DEX?
While DEXes offer increased privacy and control over your funds, they also come with risks. For instance, smart contracts that govern DEXes could have bugs, and transactions made on a DEX are irreversible. Additionally, as you’re in control of your funds, you’re also responsible for their security. Always do your due diligence before trading.
Do I need a crypto wallet to use a DEX?
Yes, you need a cryptocurrency wallet to use a DEX. A wallet is where you store your cryptocurrencies, and it’s also used to sign transactions on the blockchain. Wallets can be hardware-based or software-based. When you trade on a DEX, you’ll connect your wallet, and the DEX will facilitate trades directly from your wallet.