WTF is DEX?
In this segment: What is DEX? It features and some of the renowned platforms to trade and swap tokens.
In recent years, there has been a surge of interest in decentralized exchanges (DEX). These exchanges have attempted to address the security risks inherent in centralized platforms, but this is not enough: fundamental to the core value proposition of DEXs is the ability to avoid custody of funds altogether.
A decentralized exchange (DEX) is an exchange market that does not use or rely on a third-party service to hold the customer’s funds. Instead, the customer directly sends cryptocurrency to and from their own wallet.
The decentralized exchange (DEX) is a matchmaker between cryptocurrency traders. It removes the need for a centralized third party that handles trading and collateral and, in turn, reduces the risk of hacking. Though it does not remove the need for “human control” since the owner (operators) of the platform will decide if a cryptocurrency gets listed or not.
Decentralized exchanges are becoming more popular as of late, which makes sense. They offer many benefits to the trader, including better liquidity and security. Unfortunately, that also means a lot of confusion and uncertainty for traders who don’t know where to start with decentralized exchanges (DEX). In this blog, we introduce you to some of the renowned DEX in web3.
Uniswap is a decentralized token exchange platform built on the Ethereum blockchain. Unlike other exchanges, it never holds your funds. Trading occurs directly between peers (peer-to-peer), and you are always in control of your tokens and private keys. With an aim to disrupt the existing centralized cryptocurrency trading market and improve security, Uniswap achieved it by building an exchange that does not hold its users’ funds and by being completely transparent with all user orders and their related Ethereum transactions data.
Did you know that the number of coins that a user is holding does not affect how fast they get their orders filled? This means that your dollars are as good as anyone else’s. You don’t have to buy a bunch of UNIs just to get your order filled faster – this is one of the unique things about Uniswap and makes it appealing to investors who can quickly enter the market by spending fiat.
Apart from this, you can even contribute your crypto holdings to a liquidity pool, and by doing so, a set amount of fees are paid to you, which is generally considered an excellent source of passive income.
Balancer is a decentralized liquid crypto market where you can trade thousands of token pairs within an instant at optimal rates. Moreover, you don’t need to create an account to trade or swap tokens. While swapping ERC20 tokens, sometimes there’s a significant surge in gas fees, thus compensating users; every time a trade is made, 90% of the gas fees will be paid back in $BAL (a governance and utility token).
It has over $3.0b in liquidity to get the best possible prices on every trade; they further provide a Balancer vault where most trades don’t leave their ecosystem, resulting in low gas fees. Plus it provides MEV protection to traders.
Just like Uniswap, SushiSwap serves as a decentralized order-matching platform for issuing smart contracts that has the ability to trade any tokenized asset. On the surface, SushiSwap is a fork of the Uniswap protocol, but below this layer is where things get interesting.
It is a decentralized exchange aiming to process token swapping via yield farming and automated market makers (AMM). Significant differences between both the platforms (SushiSwap and Uniswap) lie under different fee slabs provided to LP providers and token holders. If you are looking for yield farming, then SushiSwap is the potential DEX you can look forward to.
A platform without any third-party involvement will minimize risks such as security, manipulation, and high fees. Decentralized exchanges offer anonymity through zero-knowledge proofs, which can enhance safety for investors and traders.
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