10 Best Decentralized Exchanges (DEx) of 2023
Traditionally exchanges have been a place where buyers and sellers of a commodity meet to decide on a specific price for the commodity-based on demand and supply. Initially, exchange was a common marketplace, later it evolved into an organized market place regulated by defined rules.
The decentralized exchange can facilitate the functions of exchange without relying on a central point of authority embedding all the basic principles of exchange in an autonomous technical protocol by extending the capabilities of blockchain.
In this article, we will cover the complete list of some of the major decentralized exchanges in the market. Let us look into this review in detail now,
What is Decentralized Exchange?
A decentralized exchange (“DEX”) is typically a non-custodial exchange where the user maintains their digital assets in their own digital wallet and simply utilizes the exchange to execute peer-to-peer transactions.
DEX protocols use smart contracts deployed on the Ethereum blockchain or other smart-contract enabled distributed ledgers. They facilitate the disintermediated exchange of digital assets amongst peers.
Third parties can build exchanges with user interfaces and decentralized applications that facilitate order matching and the transmission of transactions to the DEX protocol smart contract. Order book hosts, dApps, and peers on a distributed ledger can interconnect through a single DEX protocol smart contract that enables the exchange of digital assets.
Uniswap Exchange
Hayden Adam found Uniswap in November 2018. It is a decentralized exchange protocol that runs entirely on smart contracts. Uniswap allows users to trade famous tokens directly from their wallets. It uses a mechanism called Automated Market Making for directly settling trades near market price.
Uniswap is an open-source automated liquidity protocol built on Ethereum. It allows for the easy trading and listing of ERC20 tokens. The Uniswap protocol provides a decentralized marketplace of trading pairs, with each of its pairs composed of reserves of two tokens on an equivalent, 1:1 basis. All pairs are managed by separate Uniswap contracts
Read full guide on how to use Uniswap
1inch Exchange
1inch Exchange was founded by Sergej Kunz and Anton Bukov. 1inch is a platform that sources liquidity from all major decentralized exchanges into one particular platform. This makes it very easier and also helps in providing an ideal price for the required trade
It uses the concept called smart contract technology. This facilitates to split a single particular transaction across the multiple decentralized exchanges. Since it does not hold the user’s funds, 1inch is often referred to as a non-custodial application. It thus works by continuously interacting with various crypto wallets.
1Inch exchange has now launched its native token named 1INCH. The token is listed on Binance.
What is PancakeSwap?
PancakeSwap is a decentralized exchange (DEX) running on the Binance Smart Chain (BSC), which allows users to trade cryptocurrencies directly from their wallets. Launched in September 2020, PancakeSwap quickly gained popularity due to its low fees and fast transaction speeds.
How Does PancakeSwap Work?
PancakeSwap operates on an automated market maker (AMM) model, which means that it uses liquidity pools instead of traditional order books. Liquidity providers lock their funds into these pools, allowing users to trade between different tokens.
When a user wants to make a trade on PancakeSwap, the transaction is processed by smart contracts without the need for intermediaries. This eliminates the need for a central authority and allows for peer-to-peer trading.
Key Features of PancakeSwap
PancakeSwap offers several unique features that make it stand out from other decentralized exchanges:
- 1. Yield Farming: Users can earn additional tokens by providing liquidity to the platform. This process, known as yield farming, involves staking tokens in liquidity pools and earning rewards in return.
- 2. Staking: PancakeSwap allows users to stake their tokens and earn passive income in the form of CAKE tokens, the native token of the platform.
- 3. Lottery: The platform also features a lottery system where users can purchase tickets for a chance to win a portion of the prize pool.
Benefits of PancakeSwap
There are several benefits to using PancakeSwap:
- 1. Lower Fees: Compared to other decentralized exchanges on Ethereum, PancakeSwap offers significantly lower transaction fees, making it more cost-effective for traders.
- 2. Fast Transactions: Since PancakeSwap operates on the Binance Smart Chain, transactions are processed quickly, allowing for a seamless trading experience.
- 3. Wide Range of Tokens: PancakeSwap supports a wide range of tokens, including popular decentralized finance (DeFi) tokens and new projects launching on the Binance Smart Chain.
SushiSwap Exchange
Sushiswap exchange is the fork of Uniswap exchange/ The Sushiwap is a Uniswap variant with several main differences, most importantly the token SUSHI. The token possesses two functions since its launch namely to entitle holders to governance rights and a portion of the fees charged to the protocol. SushiSwap exchange was founded by Chef Nomi, but later he left the project. The CEO of FTX Sam Bankman-Fried is now the CEO of Sushiswap exchange.
With the help of the automated liquidity pools, The Sushiswap exchange allows the users to swap any ERC 20 token into any other ERC 20 token.
Binance DEx
Binance DEX is a decentralized exchange that is built over the Binance Chain. Binance DEX was founded by Changpeng Zhao in the year 2017. It has some excellent features such as low latency, low fees, high throughput, and a nice interface when compared to the other exchanges.
It also contains TradingView charts that include a wide variety of technical indicators. In addition, the platform enables users to build wallets and keep their own private keys, and the DEX also supports alternative wallets for software and hardware and integrates with the Trust Wallet and the Ledger Nano S.
IDEX Exchange
IDEX is a semi-decentralized exchange that provides high output and real-time trading experience in relation to the blockchain-based settlement. IDEX enables users to trade continuously without waiting for transactions to mine. It helps to fill multiple orders at once, and cancel orders immediately without gas costs.
IDEX consists of a trading engine, a smart contract, and a transaction processing arbiter. The smart contract is responsible for executing trade settlement and trustlessly storing all assets. The trades must be authorized by the user’s private keys.
The IDEX smart contract is designed in a unique manner such that only the exchange is authorized to submit signed trades to the Ethereum network.
Balancer Exchange
In September 2019, Mike McDonald and Fernando Martinelli launched Balancer Finance. Balancer ($BAL) is an automatic market maker (AMM) protocol that aims in reducing the cost and slippage of various cryptocurrencies between trades. Balancer is a decentralized alternative for the conventional market manufacturer, a third-party company that offers liquidity to traded assets.
Various decentralized trading platforms approach the balancer protocol to automatically find the best rates and trading prices using Smart Order Routing (SOR). The protocol also provides the requisite funds to complete the trading, using the funds available from Balancer Pools.
Kyber Exchange
Kyber network was found by Loi Luu, Victor Tran, and Yaron Velner, in the year 2017. It is headquartered in Singapore. KyberNetwork is a platform that allows the exchange and conversion of digital assets. They provide effective APIs and contract wallets that allow the users to easily receive payments from any token.
Kyber has its own governing system, KyberDAO. This makes use of their DeFi token KNC. KyberDAO allows the KNC token holders to take part in the platform governance. KNC holders can use their KNC to vote on the proposals for the future of the platform.
Bancor Exchange
Bancor was found by Galia and Guy Benartzi in the year 2016. Instead of going through a centralized trading platform, it helps to convert the digital tokens between each other. The digital assets in this platform are securely kept in Ethereum smart contracts for better transparency.
The Bancor Network has created an ideal solution in its decentralized network. Thus Bancor allows its users to instantly convert between two tokens without needing a different party to the trade.
Bitsquare Exchange
The Bitsquare exchange was founded by Manfred Karrer in 2014. Bitsquare is a peer-to-peer marketplace ideally for cryptocurrencies such as Bitcoin. It is an exchange that is fully decentralized and also eliminates the need for a name, email ID, or verification from its users. It allows those who use it to exchange bitcoin for national currencies.
It is an open-source desktop application whose construction and maintenance are being managed by developers all over the world. Bisq utilizes Tor, in order to be a peer-to-peer network that is genuinely anonymous. Also, it does not preserve fiat or bitcoins on their servers, nor does it hold them in their account.
The platform leverages Tor routing, local calculation, and personal wallets. With these factors, they can ensure that no single component of the software is subject to centralization.
Bisq Exchange
Bisq was founded by Manfred Karrer. It is one of the prominent decentralized Bitcoin exchanges. It allows users to exchange Bitcoin for national currencies without having to provide any of the identifying information. It is an open-source desktop application built and managed 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 also noted, however, that trading on Bisq is significantly slower due to these characteristics.
Conclusion
Decentralized exchanges are still in their early development stage. Some of the features such as their lower liquidity, higher trade latency, and less intuitive user interfaces make them less attractive for mainstream retail users.
However, as centralized exchanges continue to delay the listing of new cryptocurrencies and experience security exploits, more of the users will elect to adopt decentralized exchanges despite their high friction.
It is worthwhile to invest in the development and growth of the decentralized exchange ecosystem to promote liquidity in an increasingly diverse token ecosystem, greater user control of cryptocurrencies, more privacy features, and lower risk of censorship.
