The cryptocurrency market is ruled by centralized exchanges. These platforms allow users to trade and exchange digital currencies in a fast and efficient way. But there are also decentralized exchanges, also known as DEX. These platforms offer similar solutions to crypto exchanges with the main difference that they are decentralized.
In this post, we will go through the top 4 decentralized exchanges you should know in the cryptocurrency market. Moreover, we will share with you why decentralized exchanges are important and why they are helping the crypto market.
What are Decentralized Exchanges?
Decentralized exchanges are platforms that allow us to trade cryptocurrencies in a decentralized manner. We are used to trading in traditional centralized platforms such as BitMex, Binance or Coinbase. All of these offer great services, we already know it. However, they keep custody of our assets, which is not something we want them to do.
By using decentralized exchanges, we keep our assets under control at all times. That means that we do not depend on a centralized authority that will act as custodian. Decentralized exchanges are based on top of the largest blockchain networks in the market such as Ethereum (ETH), Tron (TRX) or EOS.
Nevertheless, these decentralized exchanges have some limitations. For example, we can only trade coins that are native to the blockchain in which the DEX is based on. If the decentralized platform runs on top of Ethereum, then, we will only be able to trade ERC-20 tokens.
That means we would not be able to handle coins such as Bitcoin (BTC), Litecoin (LTC) or fiat currencies. Nevertheless, there are some derivatives that allow us to have exposure to these coins despite not being available. One of the most popular coins to trade Bitcoin is WBTC (Wrapped Bitcoin).
With Decentralized Exchanges, we only need to use our wallet to trade. We will keep control of our funds and we will not even have to create an account to start trading. We will only use our wallet.
Top 5 Decentralized Exchanges
Uniswap
Uniswap is one of the largest decentralized exchanges in the cryptocurrency market. This decentralized exchange has attracted the attention of a large number of traders. Nowadays, users can easily trade their coins using Uniswap and in just a few minutes.
The whole trading process is going to be very straightforward. The team behind Uniswap decided to focus on user experience and they achieved great levels of usability. As you can see in these images, the interface is quite simple and we can start trading just by connecting our wallet.
We can use Metamask and many other wallets, including Ledger hardware wallets. This would make it very easy for all users to get access to Uniswap. Moreover, you do not have to register yourself, the system will be open directly to be used.
Considering Uniswap is a permissionless exchange, it is not necessary for token creators to request a token listing. They can simply add it there and start providing liquidity to it. Take into consideration that all the transactions you will perform on Uniswap are going to be market orders rather than limit orders. Thus, this is going to change the way in which you trade.
Additionally, DEX do not have systems that will automate trading. They are only operating with market orders and with no other options. These are things the DeFi market should review, analyse and start offering better solutions for professional traders. Currently, you can use Uniswap to trade ERC-20 coins.
You can check our full guide about What is Uniswap (UNI).
Curve Finance
Curve Finance is the next platform that we added to our list of decentralized exchanges. Curve Finance was created in order to offer users with simple trading and decentralized solutions. Users can swap their coins for others and just in a few steps.
The interface is very simple and clear and you will not have any issues to start using this platform. You will only have to connect your wallet and the system will start offering you services. This works in a very similar way to Uniswap. You don’t have to be worried about it.
Curve Finance is also based on Ethereum, meaning you will only find ERC-20 tokens in this platform. The exchange will share with you all the information about the funds you will receive and the coins that you are exchanging.
Considering that you are in charge of your coins and you keep custody of them, once you perform a trade, this cannot be undone. Furthermore, you can also use advanced options that would provide you with different features in case you want to improve your trading strategies.
However, these decentralized platforms are not offering users with the possibility to automate their trades. This is why if you want to perform advanced trading, centralized platforms are going to be the best option. This is also a permissionless exchange, meaning that everyone can list their tokens there. Take into consideration that you should carefully select the coin you are trading.
