Cryptocurrency exchanges are marketplaces where traders and investors buy, sell, and convert cryptocurrencies and blockchain-based digital tokens. These marketplaces are an integral part of the adoption of blockchain technology and the current high level of investment in cryptocurrencies.
There is widespread variation in the type of services and products on different exchanges. For instance, some provide specialist trading tools, while others provide the most competitive pricing or transaction speeds. Authorities are concerned that decentralized exchanges could promote money laundering or fund terrorists because of their anonymity.
Rise of decentralized cryptocurrency exchanges
Customers turned their attention to decentralized crypto exchanges (DEXs) following the advent of technologies that solve liquidity-related challenges that were previously common on these platforms. That has contributed significantly to the expansion of these exchanges. Also, by reducing exchange fees, slippage, and token prices, DEX aggregators and wallet extensions have helped to foster the growth of DEXes.
Following successful login with a private key, users have immediate access to their crypto assets. In addition, they would not need to divulge personal information, such as names and addresses.
DEXes are largely free from regulatory restrictions because there are no physical brokers involved in the flow of funds. Also, they are attractive to investors that place a high value on anonymity.
What is a decentralized exchange (DEX)?
Before we discuss the top cryptocurrency decentralized exchanges, we should ask ourselves the question, what is a decentralized exchange (DEX)? Simply put, a DEX is a platform that allows users to conduct peer-to-peer transactions directly amongst each other, thus eliminating intermediaries.
Many users prefer decentralized exchanges because of some of the problems associated with centralized exchanges. The underlying factor that defines DEXes is the anonymity and privacy that they offer users.
What is a liquidity pool?
One of the biggest drivers of the crypto industry is liquidity provision. But what is a liquidity pool? Essentially, these pools are made up of users who contribute their own cryptocurrencies or tokens to a common pool governed by smart contracts. The smart contracts then define the terms of trade between different assets. There is no need for centralized market makers when using liquidity pools to purchase and sell cryptocurrency on DEXes and other DeFi exchanges.
One of the most important aspects of an operational crypto-liquidity pool is to build it in a way that encourages liquidity providers to put their assets into it. As a result, the majority of liquidity providers receive trading fees and cryptocurrency rewards from the exchanges where they pool tokens. The top decentralized exchanges are popular because of their high liquidity and staking functionality. Top DeFi exchanges also rely use liquidity as their key strength.
How do decentralized exchanges work?
DEXes are not as commonly used as CEXes, which are simpler. So, how do decentralized exchanges work? Essentially,trading in DEXes is governed by smart contracts, which are self-executing protocols that facilitate trades between users. Therefore, there is no central control of transactions.
There are three ways in which DEXes handle transactions: through an on-chain order book, an off-chain order book, or through the use of an automated market maker. Many DEXes employ automated liquidity mechanisms to get their liquidity.
What are the benefits of decentralized cryptocurrency exchanges?
Before you immerse yourself in these platforms, it is important to determine the possible benefits of decentralized cryptocurrency exchanges.
When trading on decentralized exchanges, there is no third-party intermediary who handles your money. To put it another way, there is no risk of a platform being hacked, and users can rest easy knowing that their assets are safe. DEXs have a lower risk of being hacked for cryptocurrency users who hold their own cash, as these exchanges do not have access to their funds.
In order to be listed, tokens on centralized exchanges must be individually vetted and checked for compliance with local regulations. This means that DEXs are likely to feature new assets before their centralized counterparts release them, as they can include tokens created on the blockchain.
Privacy and anonymity
DEXs protect user identity and privacy in all transactions. In addition users on DEXs do not have to go through the Know Your Customer (KYC) standard identification process (KYC). As part of the KYC procedure, traders are required to provide personal information such as their full legal name and a copy of an official identification document. As a result, DEXs draw a considerable number of people who prefer to remain anonymous.
Ease of access
Because there is no central entity that can stop you from using the DEX or interfacing with others, you are free to use them as you see fit. Essentially, DEXs symbolize a more inclusive and equitable environment than CEXs.
Dex crypto exchanges eliminate the possibility that a transaction would fail because one of the parties does not fulfill its contractual obligations. By eliminating middlemen and using smart contracts to power decentralized exchanges, this danger is completely removed.
Users can rapidly conduct a web search to find out if the exchange’s smart contracts have undergone independent audits. They can also make decisions based on other traders’ experiences when utilizing a particular DEX.
Transactions on DEXs are logged, traceable, and transparent because they are made on a smart contract. In contrast, off-chain trading takes place on CEX. As a result, transactions are less visible to third parties. Consequently, it is possible for an exchange to sell more tokens of one type than it actually has on hand on CEXs, as there is no way to prove that someone purchased it at the stated price.
Full control over your money
The fact that a smart contract and not a third party is holding the assets of DEX users gives them peace of mind that their funds are not being utilized as collateral by a third party for purposes other than those agreed upon by the smart contract.
Also, because DEXs are non-custodial, users retain ownership of the private keys of their wallets. Private keys are an advanced kind of encryption that makes it possible for its owners to gain access to their digital currencies.
What are the disadvantages of decentralized cryptocurrency exchanges?
Poor user experience/customer support
User experience on most DEXs is bad. Most of them are not easy to use for beginners. To learn how DEXs work, you may need to try out hundreds of different platforms, and even then, you may find that customer service is either non-existent or extremely limited when it comes to most of these platforms.
Do not engage with fiat currencies
No fiat currency trading is allowed on decentralized exchanges. DEXs adhere to a strict trading model of crypto-to-crypto. Users who don’t already own cryptocurrencies will find it more difficult to use them.
Decentralized Exchanges vs. Centralized Exchanges
“Decentralized vs centralized exchanges” is a debate that still rages on. Determining whether you prefer a DEX or CEX will help you narrow down your options before you begin trading crypto. DEXs are peer-to-peer networks and are more independent because they don’t rely on a central authority to administer and protect your funds and money transfers. On the other hand, CEXs exercise significant control over users’ assets.
|Centralized Exchange||Decentralized Exchange|
|To open an account, you normally have to provide some sort of personal information.||You don’t need to register any personal information with DEX.|
|Fiat currency is considerably easy to deposit.||To get started, you’ll need cryptocurrency rather than fiat money.|
|The supply of coins is quite limited.||DEXs have more coins to choose from.|
|CEXs typically have custodial wallets.||Users have to link an external wallet.|
|They charge standard transaction fees.||Most operate on Ethereum network and gas fees can be quite high at times.|
|Most of them have fast transaction speeds.||Transaction speeds can be slow when there is network congestion.|
How to avoid scam decentralized platforms?
Knowing how to avoid scam decentralized platforms is essential to succeeding as a crypto trader or investor. Below, we share essential tips.
Assess the security system on the platform: All reputable DEXs have layers of security to safeguard against scammers. Smart contracts are among the most effective security measures that can be used to ensure the safe transfer of crypto. Avoid DEXs that offer no security safeguard for your assets.
Customer feedback: Always check the exchange’s feedback before making a trade. Avoid sites with excessive negative feedback.
User base and experience: With the crypto industry constantly evolving, new exchange platforms keep popping up. Since the industry is largely unregulated, you’re safer with established platforms that have tens of thousands of users. Going for a new entrant with no known background raises your risk exposure
Social media presence: A trusted platform should have a robust and active presence on social media. However, having a social media page is not enough, the trading platform has to be active and have a voice and soul that customers can interact with online.
|Changelly||USD and EUR||90+||0,50%||Czech Republic|
|Uniswap||Crypto only||1,800+||0.01% to 1% depending on liquidity pool||United States|
|PancakeSwap||BEP 20 tokens||1600+||0.25%||Unknown|
|IDEX||Crypto only||30+||Makers 0.1% Takers 0.2%||Panama|
|AtomicDEX||EURUSD||10||0.13% for makers||Malta|
|ShapeShift||USD||750+||Fluctuates depending on currency exchange||Switzerland|
|Bisq||EUR, BRL, USD, GBP, CAD, CHF, SEK, AUD, THB, NZD||11||Makers 0.1%; Takers 0.3%||European Union|
|Balancer||Crypto only||70+||0.0001% to10% depending on pool||Decentralized|
|Polkadex||USD,EUR, GBP,JPY,CHF||70+||0.2% for takers||India|
In the section below, we present a list of decentralized exchanges that we came up with following a detailed market analysis. We consider them the top decentralized exchanges based on quality of service, number of assets supported, security, trading volume among other factors.
In addition to serving as an intermediary between cryptocurrency exchanges and users, Changelly also provides non-custodial instant crypto exchange services to its users. Crypto service platforms can use Changelly’s API and payment widget in order to expand their audience and create new exchange choices.
The wide range of cryptocurrencies that you may trade on Changelly is one of its most notable features. It’s fast, efficient, and most importantly, it’s straightforward. All of this makes trading a pleasure, and the platform is ideal for day traders looking to earn quick profits.
- It has a wide range of cryptocurrencies.
- Intuitive user interface.
- Integrates with various wallets.
- Charges low crypto-to-crypto exchange fees.
- Its minimum trades are relatively high.
- It has few payment options.
- It is not regulated in the US.
Uniswap is a decentralized Ethereum-based trading platform. With just a single click, you may instantly swap any ERC-20 asset for another. It relies on underlying liquidity pools and is trustless and permissionless. Using these pools, anyone can establish a market by providing two underlying tokens. This means that users are paid in the form of the assets they contributed to the pool because Uniswap doesn’t have its own native coin.
Uniswap V2 features substantial security and usability upgrades. It is now possible to exchange a token for another, bypassing conversion to Ethereum. This has resulted in lower transaction fees because there are no gas fees.
Additionally, anyone can make contributions to Uniswap’s liquidity pools in exchange for liquidity tokens, which can be redeemed at any moment for the underlying asset of their choice. Last but not least, the platform encourages liquidity providers by charging a transaction fee of 0.25%.
- It has a staking feature that allows users to earn passive income.
- It has crypto wallet support.
- A user-friendly interface.
- Users can swap several ERC-20 tokens.
- It has no KYC requirements.
- Gas fees can be expensive at times.
- The possibility of impairment loss.
- Only supports tokens built on Ethereum.
PancakeSwap is an automated market maker (AMM) and a yield farm that operates on Binance Smart Chain. Even though PancakeSwap forked out of SushiSwap, BSC allows for faster and cheaper transactions. On PancakeSwap, users can also exercise yield farming, play lotteries and take part in initial farm offerings.
Trading, contributing to liquidity pools, and farming LP tokens are all options for users who want to maximize the benefits of providing liquidity to specific trading pairs and so increase their asset rewards.
- Liquidity providers earn rewards, with high yield rates.
- Has a high volume of daily transactions.
- Has relatively low transaction costs.
- The prediction feature can lead to loss-making since it’s a form of gambling.
- Network congestion due to a high number of users.
- Impermanent loss often occurs in liquidity pools.
- Has a relatively complicated user interface.
IDEX is a cryptocurrency exchange that is relatively new. As a result, it uses an order book to connect buyers with sellers, who then sign contracts to close transactions. To ensure a smooth trading experience, IDEX Exchange uses smart contracts to manage user transactions and provides Metamask-enabled ledger wallets.
IDEX is an exchange platform that operates on the Ethereum ecosystem and offers a wide selection of trading pairs. USDT, USDC, TUSD, and DAI markets are available, in addition to a variety of ERC-20 tokens. Because of the platform’s native design, it’s simple and easy to use. Because of its hybrid design, which incorporates elements of both a CEX and a DEX, IDEX appeals to a wide range of investors and traders.
- IDEX has several ERC-20 tokens.
- Operates on smart contracts.
- An intuitive user interface.
- IDEX only supports ERC-20 tokens.
- It does not support fiat currency trading.
- Experiences low liquidity.
- Network congestion on the Ethereum ecosystem.
AtomicDEX is a DEX that was developed by the Komodo Platform team and it boasts of being a third-generation DEX. Non-custodial, safe, and fully peer-to-peer trading of digital assets is possible via AtomicDEX thanks to a networking layer referred to as Market Maker 2.0.
The Komodo AtomicDEX API provided by AtomicDEX is quite flexible. It supports exchanges, blockchain projects, and wallet providers. The underlying protocol is open source and permissionless, and it makes use of a shared liquidity pool in order to generate a network effect and optimize benefits for all participants in the network.
- It uses cutting-edge secure atomic swap technology.
- Supports multiple blockchain tokens including Ethereum, Bitcoin BSC, and many more.
- Supports cross-chain swaps.
- Low trading fees.
- Not easy to use for inexperienced traders.
Shapeshift is a Swiss cryptocurrency exchange platform available on PC and via mobile platforms. It was created in 2013 and now has over 700 crypto assets available for trading. Following “duress” from regulators, ShapeShift implemented a KYC requirement to their exchange in September 2018. However, it has now partnered with a number of DEXes that don’t require KYC verification.
ShapeShift’s low transaction fees are one of the company’s primary selling points. When compared to other platforms, which charge a fixed percentage fee, ShapeShift fees are dependent on fluctuations in the value of an asset. Therefore, users stand to benefit from lower fees but should double-check the pricing before executing any trades.
- It has fast transaction speeds
- Users only pay mining fees.
- No KYC requirements.
- It lacks crypto-to-fiat exchange support.
In addition to being a decentralized bitcoin exchange, Bisq is also a trading protocol, a desktop application, and a free program. You can buy and sell bitcoin for fiat currency or other digital assets on the platform. Bisq charges fees denominated in bitcoin. It is completely peer-to-peer and has a dispute resolution mechanism, including arbitration and mediation.
If you want to buy cryptocurrency in a genuinely decentralized manner, Bisq has you covered. Instead of relying on an automatic order book to find a match between buyers and sellers, Bisq users search the order book manually in search of the ideal match. Its trader chat platform and dispute resolution mechanism help resolve most of the issues that may arise between traders.
- Traders search for the best offers to sell and buy crypto.
- It has a trader chat feature that facilitates communication between traders.
- Has a dispute resolution mechanism.
- It lacks many trading tools.
- Even with a dispute resolution mechanism, one can potentially lose their assets to fraudsters.
SushiSwap is an Ethereum-based decentralized system for delivering automated liquidity. With no central authority, it’s a marketplace for trading and lending. Additionally, it facilitates the use of yield instruments and staking derivatives.
When using SushiSwap, the network performance varies depending on which blockchain you’re using. The speed will be slower and the cost of transactions will be higher if you access it using Ethereum. While accessing it via BSC, Solana, or any of the other blockchains for which SushiSwap has contracts, you can expect faster speeds and lower transaction costs.
- Bisq has several payment options.
- Open for all users regardless of geographical location.
- Fast approvals.
- It supports fiat currencies.
- It does not have a verification process, which is good for privacy and anonymity.
- It has few trading tools, which experienced traders may consider inadequate.
- The platform’s trading fees are relatively high.
Bancor is a platform that enables conversion between two different tokens, following the same concepts that underpin most exchanges. There are no intermediaries involved in the Bancor system, thus users may take advantage of an automatically computed price for their tokens. Bancor, like many other Ethereum-based decentralized exchanges, operates on the Ethereum network.
As of this writing, there are more than 10,000 tokens available for exchange on Bancor with just one click. The Bancor network makes it easy to trade tokens between two different wallets. Furthermore, it provides a foundation for self-sufficient liquidity, free of a counterparty.
- Low transaction fees.
- Easy and user-friendly interface.
- Low counterparty fees.
- Users can stake their BNT tokens and earn passive income.
- Have a few assets to trade.
- It does not support fiat currency.
Curve is an Ethereum-based decentralized liquidity pool. Liquidity providers benefit from its low-risk, high-efficiency, and low-slippage trading of stable coins. The Curve Decentralized Autonomous Organization determines the fees and other aspects of the platform. Liquidity providers get half of the transaction fees, and the DAO members get the other half.
It is possible to make money through stablecoin trading and providing liquidity with minimal risk, thanks to Curve’s trading fees. Because of the large amount of accessible liquidity, the protocol allows users and smart contracts to trade between stablecoins with little slippage and fees, resulting in lower transaction costs.
- Curve charges low transaction fees.
- Curve has an intuitive user interface.
- Operates on smart contracts, which is an added security layer for transactions.
- High fluctuation on returns.
- Its links to external protocols increase risk exposure.
Automated portfolio management and trading platform, Balancer, is a non-custodial exchange. For context, investing in a traditional index fund involves paying a fee to a portfolio manager to rebalance the portfolio. The investor in Balancer receives fees from traders who use arbitrage opportunities to rebalance their portfolios.
Balancer distributes BAL tokens, the network’s governance token, which allows its holders the chance to contribute towards the platform’s developmental decisions. It is possible for traders to create their own liquidity pools with Balancer, and to define the percentage of each crypto asset in each pool. It’s not necessary to have a 50/50 split as is the case with most DEXs.
- Balancer charges low transaction fees.
- User-friendly interface.
- Balancer has high liquidity.
- Competitive rewards for providing liquidity.
- Balancer experiences impermanent loss.
- Balancer has a balance towards ERC-20 tokens.
- The exchange supports a few tokens.
The Kyber protocol is a collection of smart contracts that provides a decentralized means for conducting on-chain token exchanges. Kyber Network Crystals (KNC) are the exchange’s native tokens, and they’re utilized to manage the network and claim earnings from trading fees. While there are many excellent DEXes, Kyber is often used as the foundation for many other DeFi applications due to its extensive liquidity pools.
Why Kyber Network?
Unlike a typical decentralized exchange, Kyber is a network that facilitates the implementation of smart contract protocols that may be used on any blockchain that supports it. There are numerous decentralized applications, decentralized exchanges (DEX), and digital wallet services that employ the Kyber protocol in order to improve their performance. As a result, there’s a lot of room for expansion in the future.
In order to achieve such high liquidity, the Kyber Network combines assets from over 40 different sources. They are known as token reserves. On the other hand, persons contributing to the liquidity are called reserve entities. Consequently, Kyber is able to provide some of the most competitive prices.
- Fast transaction speeds.
- The network charges low transaction fees.
- Has high liquidity, hence no worries about market makers.
- Supports more than 70 tokens.
- Kyber has a mobile App for both Android and iOS users.
- It does not support non-Ethereum tokens.
- Gas fees can increase transaction costs significantly.
Using a Substrate as its foundation, Polkadex is a fully decentralized cryptocurrency exchange for the DeFi ecosystem. The platform places its orders Orders are placed using the Polkadex Orderbook, a non-custodial Layer 2 exchange. As part of their Polkadot parachain slot bid, Polkadex launched a crowdloan campaign in January 2022.
Pokadex allows users to link hot wallets that are based on browser extensions, mobile phones, or other devices, as well as add on-chain trading bots that automate trading. If you wish Polkadex Orderbook allows you to transfer the management of your assets to third parties. Additionally, algorithmic trading allows investors to benefit while maintaining ownership of their digital holdings.
- The orderbook system enables the platform to automatically choose the best prices for traders.
- Polkadex does not charge gas fees.
- Polkadex bridges between Polkadot and Ethereum, thus enhancing liquidity and usability.
- New users may find it difficult to use.
- It has an element of KYC, which may be attractive to some users.
Decentralized exchanges: summary
While centralized exchanges dominate the market because they provide regulatory supervision and sometimes insurance, the emergence of DeFi has opened the door for DEX protocols and aggregation tools. DeFi exchanges have become very popular since 2021 and are likely to keep growing.
Regulation is something to keep an eye on if you’re a regular user of DEX crypto. DEXs may bear the burden of new regulations as some countries consider harsher crypto regulations.
Most DEXs, as seen in this article, are Ethereum-centric and only allow trading of ERC-20 tokens. Limited DEX protocols outside of the Ethereum environment are still available. The crypto exchanges list above is not a comprehensive list of the top DEXs, but it can help you identify what to look for in the platforms.