Best Decentralized Exchanges 2021 - Ultimate Guide by Cryptogeek
- What is DEX?
Best Decentralized Exchanges
- Tips for Decentralized Exchanges
Cryptocurrencies have been around for over ten years, with the release of Bitcoin in 2009. The trend caught up in 2011 when new currencies, also called altcoins, came to the market. From that point began the era of crypto exchange.
As their popularity grew, more and more new exchange services began to come to the market over the years. Some that have existed for years implemented crypto exchange at the requests of their customers. One thing that all of them had in common is the fact that they were centralized.
For a long time, people were okay with that, mostly because there was no other choice. The fact that you’d be trading a currency backed by a decentralized network on a centralized exchange service was ironic. Plus, several hacks like Mt. Gox, Binance, Bitfinex, and several others meant that it was time for something new – DEX.
What is a DEX?
DEX stands for Decentralized Exchange, but if you don’t know what centralized and decentralized exchanges are, here’s a short explanation.
In general, an Exchange is a marketplace where people have the option to trade goods, whether that are stocks, commodities, securities, and among the many things are cryptocurrencies. Centralized exchanges are services where the exchange is the middleman between you and the person you’re making the exchange with. The service will hold both assets until you and the other person fulfil your end of the bargain and then release them. Decentralized exchanges are the ones where a middleman is not present, and you are working in a trustless environment. The saving grace is that you rely on atomic swaps and smart contracts so that you don’t get played.
Best Decentralized Exchanges
Since decentralized exchanges are still not as popular as the centralized one, I compiled a list of the best-decentralized exchanges. Note that they are in not ordered from best to worst or vice versa.
You may have heard of the Waves cryptocurrency, and the exchange is based on the same blockchain network. Waves DEX was founded in 2017, and it offered something that most of the other decentralized exchanges didn’t have. This popular DEX is decentralized, so a middleman’s need is eliminated, and you control your funds on the network. The centralized part of this decentralized exchange is a service that has the task of creating matches between two users on the network. That reduces the time it takes for an exchange to take place.
There are 52 trading pairs on Waves, and even though the main reason why it exists is its own cryptocurrency, others are available. You will be able to trade most of the popular coins like Bitcoin, Bitcoin Cash, Ether, Dash, Monero, and a few others.
Yes, I mentioned a scandal with Binance in the past involving stolen or lost coins. That Binance and this one are different. In all honesty, both come from the team of developers, and the difference is the centralization. The Binance exchange that we all know is the centralized one that is one of the world’s most popular exchange platforms. It launched in 2017, and by 2018 it was already the largest trading platform by volume, passing its older competitors.
Last year in 2019, Binance launched a decentralized version of its centralized exchange platform, providing more private exchange than its centralized counterpart. Since it is based on the Binance Chain, you get most of the features you’d get on the centralized exchange and a familiar interface that you’ll quickly get around if you used Binance Chain. There are tons of trading pairs available, much more than what Waves can offer, which is not surprising.
Don’t let the name confuse you. Even though it’s called 1InchExchange, this decentralized exchange works more like an aggregator than an actual exchange. The service grabs the info from 13 decentralized exchanges: Mooniswap, Oasis, Kyber, Uniswap, Balancer, Bancor, PMM, Uniswap v1, Sushi Swap, 0x Relays, AirSwap, Pathfinder, and DODO. The option to link your wallet and continue trading without entering any kind of personal info is a nice touch. You have the opportunity to trade most of the ERC-20 tokens on the platform.
The service works by scanning the decentralized exchanges, checking the liquidity and a few other aspects of each exchange, and suggesting the best route to get minimal slippage and best rates with the lowest fees. 1InchExchange also incorporated a gas token called CHI. The goal of it is to reduce gas usage during the Ethereum processing fees.
If this is your first-time trading cryptocurrencies, then Idex may be the best platform to start out. The platform has one of the cleanest and most user-friendly interfaces out of all crypto exchanges on the market. The idea is to give users an excellent experience, and the fact that they offer multiple wallet support and around 400 crypto pairs to trade, making Idex an excellent choice. The same can be said even for veteran traders.
Idex manages to get most things right, but there are a few aspects that people criticize. Even though it is one of the best-decentralized exchanges on the market, there is still a centralized aspect. Quite a lot of the trading part is carried out by a centralized entity, making it less decentralized than its competitors. The only thing that is decentralized is the fund settlement process carried out with Ethereum’s smart contracts.
If you are looking for fiat to Bitcoin exchange, then Bisq is an excellent choice. Unlike most of the other decentralized exchanges available on the market, this one aims to provide its users with an option to sell their Bitcoins for real money. The good thing is that unlike most of the other centralized and decentralized exchanges, this one enables that without disclosing any personal or sensitive information.
The main selling point of Bisq is its decentralization. Some of the decentralized exchanges on this list have some centralized aspect, but Bisq doesn’t. It utilizes local computing power and Tor protocols to ensure that no part of it is centralized. There are some downsides to this. Due to how things work with decentralized platforms, the transaction time is higher than its competitors. Also, since there is no centralized component that will match you with a buyer, you will need to do some manual work to achieve that.
Tips for Decentralized Exchanges
Now that I’ve outlined what I believe are the top decentralized exchanges, here are a few tips on choosing the best one for you.
My decentralized exchanges list is a relatively short one compared to all exchanges available on the market, so don’t stick to it at any cost. If none of my suggestions works for you, there are other fishes in the sea.
When you choose the exchange platform, double-check if it supports the tokens or fiat currencies that you want or hold. If you have multiple cryptocurrencies, you may need to use more than one exchange. The reason for that is not all decentralized exchanges support all cryptocurrencies.
Some users are more concerned with privacy and security than with reasonable rates or lower fees. If you fall in that category, make sure to aim for really decentralized exchanges, like Bisq.
Check the trading volume of the exchange. Not everyone has the same trading volume in mind. You may want to sell 50 Bitcoins while I may be looking at selling a couple of Ethers. Both of us will need to check the decentralized exchanges’ liquidity to ensure that our needs will be fulfilled.
Decentralized exchanges are not as popular or as widely used as the centralized ones. Regardless of that, their popularity has grown quite a lot over the past several years. We can see that from the number of users requesting them. Centralized exchanges are good, but some people are not as comfortable using them due to some aspects that make them prone to hacks or not very privacy-oriented.
My list of decentralized exchanges outlines some of the more popular options to help you in your search for the one for you. It is not a complete list, and there are quite a lot more available. If none of them are working as you need them to, then there are others that may be more suitable for your needs.