Top Cryptocurrency exchange: Beauty of Decentralized Exchanges and list of top 11 DEX

Decentralized Exchanges: best cryptocurrency exchange


Popularly known as DEX, The Decentralised Cryptocurrency Exchange is one of the top cryptocurrency exchanges that holds the true essence of all the aspects of the volatile digital assets providing unique ownership.

Unlike the Centralized Exchanges, their counterparts Decentralised ones do not act like a middleman handling the digital wallets internally.

If the private key that encrypts the wallet is lost, it’s lost forever! However, the Decentralised counterparts of Centralization have their pros and cons.

Probably the best crypto exchange or not, let us understand them in detail.

Basics: A comparison to Centralized Exchanges

An Exchange (EX )is a place where financial instruments such as securities, commodities, shares, bonds, currencies, and derivatives are traded. Stock market exchanges and Centralized exchanges (CEX) like Binance, Coinbase, Bitfinex, etc are properly regulated.

Centralized Exchanges stand true to their meaning of “exchange”, regulated and governed just letting the trade of volatility of digital assets trade happen only fulfilling half of Cryptocurrency goals.

The only beauty of Centralized Exchanges making them the best-investing cryptocurrency is that they only deal with Digital cryptocurrency, they don’t trade on companies or organizations listed on a country’s national stock exchange.

In fact, they trade Digital Assets internationally.

The Decentralised exchanges are unregulated and hand over unique ownership just like the Decentralisation idea behind the cryptocurrency.

Centralized Exchanges offer unique ownership of digital assets only partially. This is because they act as a middleman handling the Hot wallets holding the cryptocurrency.

The access to the forgotten/lost private key can be recovered in minutes in case of Centralized Exchanges.
Cryptocurrency is burned in case of loss of private key in Decentralised exchanges as no one in the network holds any sort of access to the Wallet.

Since Centralized exchanges hold the digital assets in the wallets, the investor is likely to lose them owing to unforeseen circumstances.
The Centralized company can file for bankruptcy and is liable to only consolidate some part of the loss as they are governed by their legal company laws.

Another possibility of losing digital assets is hacking fraud which has already happened in the past with Centralized Exchanges Gox and Coincheck etc.

This can never happen in Decentralised counterparts because there is nobody to hold digital assets, it is only a blockchain network in which the buyer and seller are matched through complex algorithms.

Since these exchanges work on a system of Decentralisation, there is no single entity to regulate and control the system or anyone’s assets, this environment is called a Trustless Environment.

Decentralized Exchanges Complete Details

What are these top cryptocurrency exchanges?

Decentralized Exchanges are true to the idea of Deintermediatization of Cryptocurrency and stand true to its meaning.

This force of trust in inventing the cryptocurrency drives the aim of Decentralised exchanges as well.
A decentralized Exchange isn’t particularly an exchange that holds and governs digital assets but it is a type of best crypto exchange that just matches buyers and sellers.

Exists in form of applications, that have no duty except matching, hence, it is not completely an exchange- just acts as a partial exchange.

These exchanges operate on blockchain and are available to users as applications.

There is no option for Recovery in these exchanges as the loss of private key burns cryptocurrency and reduces the digital assets operating in the network.

Although the digital asset belongs to that owner/particular user forever that can not be used for trading leading to no cashing out of Fiat money selling the asset and the money spent on buying it is lost forever.

Recovery is a major issue but the Decentralised exchanges are clear about their role in Cryptocurrency trading with disclaimers of the user being the sole owner and handler of their hot wallet.

More about DEX..

The number of Decentralised Exchanges that operate is much lower than the Centralized Exchanges making only a few popular and leading to the scarcity of trustless environments.

As cryptocurrency can be purchased/sold

  • Directly by Crypto-Crypto Trade.
  • Fiat money-Crypto Trade.

The option of Fiat money-Crypto and Crypto-Fiat money transactions was quite tiring for them.
To do this, they had to rely on another body for cashing out and cashing in the Fiat Money, making the operation of Decentralised exchanges slower than the Centralized ones.

Centralized exchanges work with banks and other financial institutions for quick conversions and depositions.

The process of liquidation in the Decentralised Exchanges was quite slow making a person disinterested sometimes. This is why trading volumes of Decentralised Exchanges are way lower than the Centralized ones.

DEX(Trading Volumes) <<< CEX(Trading Volumes)

The trading carried out in Decentralised Exchanges is slowly making it even more volatile.
Here is how it happens,
If you place an order at the current Price A of Cryptocurrency C,
the next moment price gets an increment or decrement by a factor “b”, which can be any real number
At time = t,
Price(C) = A
At time = t+1,
Price(C) = A + b
Price(C) = A – b
In Centralized Exchanges, you are likely to get your order completed at Price A only but in the case of Decentralised Exchanges,
it is likely that this will sell at the price of either A + b or A – b.

DEX(Time of Trade) >>> CEX(Time of Trade)
Sometimes this volatility can be so huge that the investor may lose a lot of money. This is one of the disadvantages of the best crypto exchange.

The reason for this issue is that only 5% of people playing in Cryptocurrency trade in Decentralised Applications owing to their slow process, high trading times, and lack of marketing.

More the number of trades, the faster the trading time.

The complex User Experience and algorithms are another reason for low trading volumes causing beginner investors in Cryptocurrency to move into the best investing cryptocurrency exchanges available in the markets.

Although DEX is not beginner-friendly and is complicated, DEX is evolving continuously to serve the best and reduce trading times.

New DEX is making waves with the latest technologies enhancing the experience, safety, and quick trading times.

These use technologies of crypto-crypto pairs, smart contracts, and atomic swapping.

Few DEX is capturing the market such as the new DEX Uniswap and Pancake Swap with experts believing that DEX would capture the market of exchange by beating CEX.

DEX operations

DEX uses the P2P network or peer-to-peer network for trading and settling the transactions directly on the blockchain unlike the Centralized Counterparts recording them on an internal database for further procedures.

Most DEX has liquidity pools. The liquidity pool is a deposit that contains the tokens that have to be traded, put in by the investors themselves in pairs for earning a transactional fee.

From here, the buyers get their required tokens in pairs.
The problem can occur when there are enough trading pairs in the pools and when the volatile tokens become restless.

Some DEX operates on-chain order books where the orders are taken and lenders provide the crypto token, making everyone in the system make something.

DEX doesn’t allow Fiat-Crypto trades as they only support Crypto-Crypto transactions.

To use DEX, one must have immense knowledge of Crypto because they require matching of crypto to be efficient as there is direct Crypto-Crypto trading which could result in huge profits or losses by pairing stable digital assets with a volatile one.

This is why these aren’t beginner-friendly.

To remove the Crypto-Crypto transactional instability, a token known as “I Owe You” is released having the same value as the connected crypto token. This is used to fasten up the trading times.

Centralized Exchanges are operated on traditional methods of exchanges that use the “order book” algorithms that match the buyers and sellers along with Escrow.

The seller is required to submit the cryptocurrency and the receiver is required to put in their Fiat Money/Crypto before receiving their order ensuring safe trading.

Decentralized Exchanges operate on Smart Contracts and Atomic swaps.

What are Smart Contracts and Atomic swaps?

Smart Contracts

Smart contracts are digital contracts that get self-execution. Smart contracts lock the total value of funds for a user known as Total Value Locked (TVL).

Let us understand them in detail.

Smart Contracts are “codes”, the codes are written on the blockchain and are executed when a specific set of predetermined conditions are met.

These mutual agreements are automated or self-run as soon as the conditions are met and the outcome of the code is the release of crypto from either the buyer or seller side, and the transaction is recorded on the blockchain only to be never-interchanged again.

In short, the buyer and seller should carry on the transaction within a small time limit, beyond which the transaction does not occur.

Smart contracts contribute to a trustless environment by creating automated workflows as a set of conditional programs of If-else statements.

An example of the code could be,

Timer T1
Buyer releases Crypto for buying;
Smart Contract = 1;
Else Smart Contract = 0
Seller releases Crypto for selling;
Smart Contract = 1;
Else Smart Contract = 0

They operate as If statements as If1 and If2 work together-

If1: The buyer does not release Crypto for buying Crypto, the smart contract will not execute.

If2: If the seller does not release the Crypto that has to be sold, the smart contract will not execute.

A smart contract is only executed in the case of If3

If3: The buyer releases Crypto for buying Crypto, and at the same time if the seller releases Crypto that has to be sold, the smart contract will be executed.

The conditions are to be satisfied within the time boundary, beyond which the smart contract gets terminated.

This ensures quick trading of the digital assets and safety from any sort of fraud occurring such that both parties don’t lose anything.

The contracts are smart enough to carry out effective transactions unlike the Centralized counterpart Escrow, which holds the digital asset and Fiat money.

Smart contracts don’t have access to anybody’s wallet, they are just present to create a trust-less environment maintain safety, improve trading technology, and ensure quick delivery of the required decentralized service.

Atomic swaps

Atomic Swap is a process of exchange of Cryptocurrency on different blockchains such as Ethereum and Binance.
A better understanding is that when two cryptocurrencies belong to different blockchains, they can’t be directly traded.

In CEX, they are first converted into Fiat Money and traded but in the case of DEX, they generally use IOU.

However, an even more efficient and quicker way is to involve a single technology in carrying out different transactions.

This technology uses smart contracts to carry on the transaction is called Atomic swap because it does swapping-meaning exchanging. This makes DEX a top cryptocurrency exchange.

Features…Or Risks?

  • Some of the DEX is open-source, which means anyone can go through their working procedures and contribute to enhancing crypto trading to make them the best crypto exchange. The risk of open source is that sometimes hackers commit fraudulent activities which may hinder trade.
  • There is a variety of tokens available for trading on DEX, unlike the CEX.
  • CEX requires complete authentication using government IDs for trading but most DEX doesn’t follow this.
  • One should be careful in transferring to wallets because DEX is not liable to manage any case of hit-miss. The cryptocurrency might be at risk of burning but the user can avoid this if careful.
  • DEX(Safety) >>> CEX(Safety)
  • DEX(Volatilty) >>> CEX(Volatility)
  • DEX(Technology) >>> CEX(Technology)

How to start with DEX?

To start with DEX
1. Download the DEX Application on your mobile phone.
2. Scan the QR code to connect the wallet.
3. Get a supply of the Ethereum blockchain to get started. This can be taken from any other common exchange.
4. Pay the gas fee which powers decentralized transactions and records them on the blockchain.
5. Pay the trading fee- as it is the way only DEX makes money.
6. Start Cryptocurrency Trading on one of the top cryptocurrencies DEX.
7. Don’t forget the Private Key. As only a private key is required to log in to the DEX-No personal information. I

t is recommended not to store private keys digitally anywhere, it should be existent only in the real world and of course, in your heart.

List of top 10 DEX/Decentralized Exchanges to look for in 2022

Based on trading volumes, and market share of Decentralized Finance markets,

  1. Uniswap
  2. dYdX
  3. PancakeSwap
  4. KineProtocol
  5. HoneySwap
  6. ApploX DEX
  7. SpookySwap
  8. CurveFinance
  9. Biswap
  10. DeriProtocol
  11. DiFiChain DEX

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