A decentralized exchange (DEX) is a cryptocurrency exchange that operates in a decentralized way, without any central authority on-chain without any KYC (know your customer) compliance needed. Today, we are going to look at the top 20 decentralized exchanges and explore the benefits of each service and how to use it in 2021.
DEXes attempt to execute the same scale of transaction volumes as centralized exchanges without a central authority — or engine — to execute trades.
Starting out it’s important to note: that not every decentralized exchange is created equally some of these services are only built for Ethereum, BNB, or other blockchains unable to utilize cross-chain swaps. So make sure to pay attention to each of the reviews of decentralized exchanges noting what each DEX is built to operate on. If you accidentally send an Ethereum asset to BNB chain or BNB asset to an Ethereum chain you will have successfully lost your funds.
Without further ado, let’s jump into it!
- UniSwap (Ethereum-based ERC-20 only send ETH assets.)
PROS: One of the biggest DEXes in volume, most popular, and user-friendly DEXes is Uniswap. Uniswap trades millions of dollars in volume on the Ethereum blockchain a day. It’s also extremely simple to use by connecting your non-custodial Metamask wallet or hardware wallet to use their interface and then swap your digital assets. Which means you are in total control of yours funds.
CONS: The transaction fees can sometimes be a little ridiculous if the Ethereum network is congested, only ERC-20 assets.
2. 0x Protocol (Ethereum-based ERC-20 only send ETH assets.)
The 0x protocol is a technology built on top of Ethereum. All of the tokens under 0x are ERC-20 or trade using WETH (“wrapped ETH”). 0x offers centralized databases referred to as Relayers, to help improve Ethereum’s scaling issues. Relayers arbitrate activity between users before interacting with Ethereum’s blockchain. For example by matching orders between traders. In fact, several DEXes have been built using 0x relay technology.
PROS: No KYC, easy to use swaps for ERC-20 assets.
CONS: The transaction fees can sometimes be a little ridiculous if the Ethereum network is congested, only for ERC-20 assets.
3. Bisq (decentralized Bitcoin exchange)
Bisq is a notable decentralized Bitcoin exchange. Bisq allows users to exchange Bitcoin for national currencies without having to divulge any identifying information. It is an open-source desktop application built and sustained by developers all over the world.
It leverages Tor routing, local computing, and personal wallets to ensure that no single component of the software is centralized. It should be noted, however, that trading on Bisq is significantly slower due to these characteristics. Unlike 0x Relayers, no part of a trade is centralized — including matching buyers and sellers.
Bitcoin sellers must manually search for orders in their preferred national currency and non-crypto payment method.
PROS: NO KYC, escrow service, secure.
CONS: Difficult to use, requires you to install software, only Bitcoin exchanged.
4. Airswap Protocol
Airswap Protocol. Airswap does not require any identifying information for traders to begin trading, nor do they charge fees.
Indeed there are many similarities between Airswap and 0x, but examining their differences will make clear the wide variety of Ethereum-based approaches to DEXes.
Exactly like 0x, Airswap balances use off-chain activity for speed with other on-chain activity for security. However, instead of Relayers, off-chain activity in Airswap is executed by a peer discovery engine. This engine also ensures that there is real intent to buy and sell specific assets. Each party has expressly sought out the counterparty to trade with, thus order cancellations are rare on Airswap.
Once a trading partner is established, the two parties then negotiate the price for the digital asset in question. If a price cannot be agreed upon, the parties must then query an oracle. The Airswap whitepaper explains that “the Oracle provides this pricing information to help both the Maker and the Taker make more educated pricing decisions and to smooth the process of trade negotiation.”
PROS: No deposit fees, no limits for deposits or withdrawals
CONS: Doesn’t support major stablecoins