If you are getting into the decentralized finance world, you will hear about Decentralized exchanges or dex. These are permission-less cryptocurrency exchanges that you can use with wallets such as Metamask (we will have a wallet article soon) with no identity or very little information of who you are and where you are trading from. To clarify, these transactions are not anonymous since a record creates every time a transaction is made that everybody can see on Etherscan. The benefits of these exchanges are that every trade is made from your wallet and stays in your wallet. No middle man is holding your funds, and if you’re familiar with the crypto world, you will hear this phrase a lot “Not your keys, not your coins”, this means that if you are holding (or Hodl) your cryptocurrencies in other places that are not your own digital wallet, you may be running the danger that the site that is holding your crypto can get hacked or they can run off with your funds. Things like this happened quite often in the early days, and it’s still happening today.
On the downside, decentralized exchanges (dexes) are not very easy to use. You would need to own cryptocurrency such as Ethereum or Binance Coin to start. For every transaction, you will incur ” a gas fee” this fee is to keep the platform running and incentivize the people on the other end that are providing liquidity by sharing the amount you paid. Gas fees can become quite expensive depending on the price of ethereum and the volume that’s being processed at that particular time. This is a big problem, but it’s getting solves by some protocols like BSC and other protocols that can work on top of ethereum to lower these costs (Layer 2). Recently the ethereum foundation has been updating the system for their version 2.0 that is supposed to solve the gas fees and other significant issues.
Top Dexes you can use.
Uniswap.
It’s the most prominent decentralized exchange platform and the one with the most users. It’s in its v3 version, but the v2 is the one that has the most amount of coins to trade all the tokens and transactions are on the eterheum platform. It supports around five different wallets. The governance token of this exchange is via their $UNI token, in which holders can take part in the decisions of the future of the protocol.
SushiSwap
This was a virtual copy of Uniswap code, but now it has become a whole thing on its own. At this time, you can trade, lend, borrow, stake, farm and pool ERC-20 tokens (tokens built on ethereum). Their native token is $Sushi which you can stake to earn interest, and it supports around 8 different types of wallets. Because of the fluctuation of ethereum gas fees, they have moved to a layer 2 solution using the Polygon protocol.
Pancake Swap
This platform is built on the Binance Smart Chain. To use this exchange, you would need to have $BNB, which is the native Binance token. You can farm, pool, trade, provide liquidity, and even purchase NFT (non fungible tokens) on this platform. Its native currency is $Cake token which you can stake and also be part of the governance. Pancake Swap does not have the depth of tokens as Uniswap or SushiSwap, but it has lower fees and quicker process times.
MDEX
This is one of the newest exchanges on the Binance Smart Chain. It has almost the same amount of tokes as Pancake Swap but is a bit more limited since you can only do things like trade, liquidity, and pool your digital assets. They also have an option call boardroom to stake several tokes such as they $MDEX, $COW and $WHT.
With Pancake and Mdex the most significant critique is that they use Binance Smart Chain. Which was created by the biggest centralized exchange on the planet Binance; some people have a problem with this since a corporation created it. However, many users are flooding into these dexes, and others are using layer 2 for quickness and lower fees when trading.
Dexes are popping up all the time, and like everything in defi it’s constantly changing. I suggest always doing your own research when you are trying something new. The future looks very brilliant for dexes since governments are trying to crack down on centralizing exchanges and many people now need to trade on something that cannot be controlled as easily by a central state. Happy trading!
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