Decentralized Exchanges (DEX) | List and overview of the top 10 DEX in terms of trading volume and attendance

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A cryptocurrency exchange is one of the main tools for working with digital assets. Initially, these sites were for the most part centralized (CEX), but over time, all the shortcomings of such a solution began to surface. These are mainly hacker attacks. There are many known cases of exchange hacks, as a result of which users irrevocably lose money.

Decentralized cryptocurrency exchanges (DEX) – a new round in the development of trading. It is understood that the funds are stored in the wallets of the users themselves, and the site acts only as a tool for exchange.

The trading volume on all DEXs in October 2020 amounted to $ 18.46 billion. This is 23% less than in September ($ 24 billion). The main volume falls on the decentralized exchanges Uniswap, Curve, 0x, Balancer, Sushiswap.

Trading volume on DEX for January-October 2020 // data from theblockcrypto.com

The editorial staff of Btcnewsweb.com has prepared an overview of the currently demanded decentralized crypto-exchanges.

What are decentralized exchanges and how they differ from centralized

The operating principles of DEX and CEX are fundamentally different, although the trading functionality is visually similar. A centralized exchange works much like a bank. You deposit cryptocurrency, and the exchange stores it and uses it for its own purposes, if necessary, fulfilling your requests for the withdrawal or exchange of assets. Users of a centralized exchange do not have their own private keys, as happens when working with a crypto wallet. From the point of view of the blockchain, the owner of the funds is the exchange. And already inside it, assets are distributed among users.

In the case of a decentralized exchange, the site does not store funds. Typically, there is a protocol for matching orders, and funds are transferred between individual wallets using smart contracts. The underlying mechanisms can vary. For example, AMM (Automatic Market Maker) can be used instead of orders.

DEX varieties

Basically, decentralized cryptocurrency exchanges are classified according to two criteria:

  • Place of execution of transactions. The exchange can be performed directly on the main blockchain, or on a third-party, with the subsequent transfer of the results to the main one. The second method is often chosen in order to speed up and facilitate the process if the underlying chain is heavily loaded.
  • The way of executing transactions. Some sites support the order book system, similar to that used on CEX. But recently, exchanges with AMM (automatic market maker) are gaining popularity. Their essence lies in the creation of liquidity pools by users, within which an instant exchange is then carried out based on the rate determined by supply and demand.

Consider the decentralized cryptocurrency exchanges, which are currently the most in demand, based on traffic and trading volumes.

Popular decentralized exchanges for 2020

1. Uniswap

Uniswap is a decentralized protocol for exchanging Ethereum tokens that uses liquidity pools instead of order books (it was this platform that helped popularize this method, although it was invented before it). Within the framework of the exchange, you can exchange tokens, create and manage your own markets (liquidity pools), view your share in the liquidity pool, current exchange rates, etc.

Uniswap Dex

Liquidity providers can add or withdraw their funds at any time. For adding funds, they receive an incentive in the form of UNI tokens. Initially, the pool creator sets the desired rate, which is then automatically adjusted when trading. The price changes whenever there is less one token in the pair than the other.

2. Sushiswap

Sushiswap, like Uniswap, is an AMM-based decentralized exchange protocol that uses liquidity pools. Any user can create a liquidity pool by providing any ERC-20 tokens or ether of their choice. Prices are generated automatically. SushiSwap is community driven – holders of the SUSHI token distributed as a reward for supplying liquidity have the right to vote on project governance.

Sushiswap Dex

Sushiswap allows you to exchange tokens, manage your liquidity pools, and receive rewards for investing assets and staking.

3. Aave

Aave is an open source, non-custodial Ethereum protocol whose main function is decentralized lending. The ERC20 compliant aTokens that the protocol creates for lenders are generated in the same quantity as user-supplied coins. Immediately after that, the accrual of assets begins.

Aave Dex

Other participants are eligible to borrow funds against supported assets. Each token has its own liquidation threshold, required collateral, penalties for default, interest rates, etc. Thus, the protocol allows you to exchange your assets for the needed ones at any time without selling them.

  • Website: https://aave.com/
  • Commission: 0.3%
  •  Cryptocurrencies: 40
  • Trading pairs: 42
  • Year: 2019

4. 0x

0x is a framework for peer-to-peer token exchange on the Ethereum blockchain. It is actively used by developers of decentralized applications through the API. The protocol serves as a kind of building block for developers who need trading functionality. 0x provides secure smart contracts that are independently audited, ecosystem-adapted developer tools and free access to a liquidity pool.

0x Dex

The 0x-related project Matcha is an aggregator of exchange rate information for fifteen decentralized crypto exchanges. It allows you to quickly trade where it is most profitable at the moment. Automatically distributes the order to the supported platforms.

  • Website: https://matcha.xyz/
  • Commission: no trading fees, only a small Ethereum gas commission paid + 0x protocol fee
  •  Cryptocurrencies: 40
  • Trading pairs: 42
  • Year: –

5. Balancer

Balancer is another automated market maker powered by Ethereum. Users can create pools or add liquidity to existing ones, while, instead of the traditional distribution model, it is allowed to use any number of assets for one or another side of a trading pair. Subsequently, the user earns income based on the commission fees for the trading of other participants in the pool.

Balancer Dex

Within Balancer, there are different types of pools (private, public, smart pools), which differ in the principle of control and permissions to change parameters. BAL tokens are distributed among liquidity providers, a process called “liquidity mining”.

  • Website: https://balancer.exchange/#/swap
  • Commission: exchange commission is customizable for each pool and 100% goes to liquidity providers
  •  Cryptocurrencies: 152
  • Trading pairs: 224
  • Year: 2020

6. Compound

The Compound Algorithmic Protocol on Ethereum provides decentralized lending services. Its two main functions are to earn interest (when depositing funds into the pool) and to issue secured loans using any supported assets. Rates change based on supply and demand in the market, approximately every 15 seconds. User balances are presented in cTokens format, providing liquidity within the platform.

Compound Dex

For performing actions on Compound, users receive a reward – COMP tokens, which are subsequently used to manage the protocol – proposing changes and voting for other people’s proposals.

7. Curve

Curve is an Ethereum liquidity pool designed to trade stablecoins with high efficiency and low slippage. It also has a lower level of commission fees. The protocol was developed specifically for stablecoins and fully takes into account their features. Tokens in liquidity pools also interact with external protocols such as Compound.

Curve Dex

Pools under Curve allow exchanges with a wide range of stablecoins, both dollar and tokenized bitcoin. The native CRV token is distributed as a reward for the supply of liquidity.

8. JustSwap

JustSwap is a decentralized exchange for peer-to-peer exchange of TRC-20 tokens (located on the Tron blockchain). The rest of the functionality is similar to similar sites with AMM. Conversion is carried out between any two TRC-20 tokens based on an automatically determined price. All trading fees go directly as an incentive to the liquidity providers, not the protocol itself.

JustSwap Dex

9. dYdx

dYdx is a feature-rich peer-to-peer platform that allows you to trade, borrow and lend tokens. This platform works using an order book – a classic order book. It also allows you to create margin positions with up to 10x leverage. And by keeping funds in the account, you can earn a variable interest rate.

dYdx Dex

dYdX collects spot and credit liquidity from multiple exchanges at once, providing maximum flexibility. Access to trade is very fast, there is no need to register.

  • Website: https://trade.dydx.exchange/
  • Commission: from 0% to 0.3% per spot; from -0.025% to 0.2% for contracts
  • Cryptocurrencies: 2
  • Trading pairs: 3
  • Year: 2019
  • Margin trading: yes
  • Is there Russian language: yes

10. Binance Dex

Binance Dex

The decentralized marketplace from the Binance exchange also works on the principle of an order book. Assets are available for trading that are located on the Binance Chain blockchain. The comparison is carried out inside the nodes of the blockchain, and all transactions are recorded in it, thus forming a complete and transparent history of activity.

The logic of order matching on DEX is somewhat different from the usual centralized exchange. There is testnet – a test network where you can try your hand at trading without investing real assets, and understand the essence of the site’s work.

How to choose DEX

Choosing the best decentralized cryptocurrency exchange should be made according to your needs. The main factors are:

✅ Availability of the required trading pairs.

✅ Liquidity. The higher it is, the easier and faster trading will be.

✅ Safety. Of course, in the case of decentralized exchanges, the user keeps his funds on his own and does not provide anyone with confidential information. However, vulnerabilities and protocol can lead to losses. Make sure the protocol has been audited by independent companies.

✅ Commissions. With active trading, fees can eat up a significant part of the profit.

✅ Simplicity and convenience of the interface.

Ultimately, you are responsible for your funds. The high volatility of assets creates certain risks, and the choice of a suitable site is only one of the steps that can help make profitable financial transactions.

How to get started with DEX

The way to get started with a decentralized cryptocurrency exchange depends on its type.

Some, like Binance Dex, require the creation of a separate cryptocurrency wallet. You will need to set a password, save the keys and the seed phrase, which will later be needed to access the funds.

Other DEXs work in conjunction with web3 wallets (for example, Metamask or Trust Wallet) or hardware wallets Ledger, Trezor. In this case, you need to click the Connect Wallet button or similar, and then enter the password from your wallet in order to use the funds in working with the protocol. With every transaction, the wallet will ask for the user’s permission.

In both cases, the user is not required to provide any data – no phone number, no e-mail, let alone a name or address. Trading takes place completely anonymously.

Expert opinions on the future of DEX

Dogifox founder and CEO, cryptocurrency analyst Nicholas Merten, argued back in August that decentralized exchanges have higher trading volumes than centralized ones. According to the expert, this has been the dream of many since 2017.

Vitalik Buterin said back in 2018 that centralized exchanges should “burn in hell”, mainly due to the fact that people often have to pay huge sums to place new tokens on them. Centralized exchanges only exist because they serve as a gateway between the fiat money world and cryptocurrencies, he said.

American entrepreneur and crypto enthusiast John McAfee said a year ago that “centralized exchanges are our weak point” and even launched a decentralized exchange powered by the Ethereum (ETH) blockchain, calling it McAfeedex. True, the site has not gained popularity and is no longer working.

Binance CEO Changpeng Zhao has shown himself to be a strong proponent of decentralization. The Binance DEX exchange continues to evolve, and the developer believes that within a few years, decentralized exchanges will be able to absorb centralized ones; he also spoke positively about AMM technology.

Advantages and disadvantages

Pros ✅

✅ Complete management of your funds. You don’t need to trust them to third parties and companies.

✅ Anonymity. It is not required to provide any personal data or to undergo verification.

✅ Availability. While regulators in different countries periodically impose bans on the use of crypto exchanges, decentralized platforms can be used by anyone and from any country.

Cons ❌

❌ Trade restrictions. It is difficult to organize the exchange of cryptocurrencies hosted on different blockchains. Although this problem is already partially solved by synthetic assets.

❌ Somewhat more complex controls. You need to deal with storing keys and seed phrases from wallets, instead of just creating an account on the exchange.

❌ Platforms can face scalability issues as the blockchain imposes certain limits on the number of transactions per second.

Conclusion

The DEX concept is still evolving. Amid incidents with centralized exchanges, users are paying more and more attention to decentralized exchanges, recognizing their advantages. It is possible that in a few years these sites will leave CEX far behind. It can also be noted that, in general, DEX fits much more logically into the ideology of blockchain and cryptocurrencies, which are initially based on decentralization and independence.

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