Welcome to Kafycrypto, your number one crypto news, and marketing channel. This post is about decentralized cryptocurrency exchanges.
The term ‘decentralized cryptocurrency exchanges’ may seem wordy, and sound strange to you at this moment. Especially if you are new to the whole cryptocurrency and blockchain dance. However, you can relax now. Because you will gradually get to understand and appreciate the concept of exchanges as you read this article.
A few months ago I had an urgent need to obtain some U.S. Dollars. I had some cash in my local currency that I was willing to convert to Dollars for a financial goal. So I considered my options… Should I use a bank or a local broker in the currency black market?
I decided to try all channels available until I successfully change my local currency to Dollars. Finally, having tried most official means, I changed the money through the black market.
The experience recounted above is not unique to me. There often comes the need to exchange currencies. This need has become intensified in recent times with the emergence of cryptocurrencies.
Most people have embraced cryptocurrencies. Cryptocurrencies are used for online transactions and more. But how to obtain cryptocurrency? Cryptocurrency exchanges.
Cryptocurrency exchanges are online platforms that enable individuals to exchange their local currencies for cryptocurrencies. Exchanges also serve to convert one cryptocurrency to another.
There are two classes of cryptocurrency exchanges based on user authority. Centralized crypto exchanges operate like banks. Crypto users buy from them based on their rules and terms of service. Decentralized cryptocurrency exchanges operate differently. They are more user-friendly. Let’s learn more about them in the following section.
What are Decentralized Cryptocurrency Exchanges?
A decentralized exchange, also known as DEX, is defined as a peer-to-peer marketplace by which transactions are directly among crypto traders. Decentralized exchanges focus on accomplishing one of the delicate needs of cryptocurrency. Which is facilitating the growth of financial transactions without the need for third-party financial officials like brokers, banks, or any other mediator.
Many popular DEXs, which include Uniswap and Sushiwap, operate on the Ethereum Blockchain protocol.
These decentralized exchanges depend on smart contracts. Smart contracts are self-activating pieces of code on a blockchain. These codes run automatically when certain predetermined conditions are met. These smart contracts make room for additional privacy and less negligence than a centralized cryptocurrency exchange.
On the other hand, regardless that smart contracts are rules-based, the shortage of a mediator third party implies that the user is left vulnerable at their risk, so DEXs are meant for experienced investors.
The Benefits of Decentralized Cryptocurrency Exchanges
- Drastically reduced rate of hacking: Since all of the funds in a DEX trade are being stored in the traders’ wallets, they are not vulnerable to being hacked.
- Wide Diversity: If you desire to search for a hot token in its infant state, DeFi is recommended. DEXs supply a virtually boundless range of tokens, from the popular to the weird and random. That’s because anyone can create an Ethereum-based token and invent a liquidity pool for it, so you will find a more significant group of projects, both unvetted and vetted
- Incognito: There are no personal details mandated to make use of the most popular DEXs.
5 Excellent Decentralized Cryptocurrency Exchanges
Certain characteristics mark a good decentralized exchange. A good DEX should be compatible with every user’s wallet. And also compatible with the automated market-making system. Many of such DEXs also have an order book and useful analytical tools.
It’s also important for decentralized exchanges to incorporate NFT marketplaces. And in terms of transactions, the payment platforms should be flexible with proper transaction history.
Observe these five worthy decentralized exchanges. Take some time to do some research on them as you grow your crypto portfolio:
Uniswap V3 is the modified version of the Uniswap protocol. Consequently, it stands as one of the most known Ethereum-based DeFi protocols in the cryptocurrency market space.
It operates according to the AMM model with liquidity providers and the pool of liquidity.
The major bullet of V3 is intensive liquidity which results in the organization of higher capital for traders, and intense liquidity for liquidity providers.
With the wide trading volume, Uniswap has proven to be one of the major DeFi concords in the crypto industry.
Algebra is an intensive liquidity DEX with built-in diverse fees and farming. These features have reduced temporary loss and elevated profit both for liquidity providers and traders. Therefore, providing appropriate balance within them. With such innovative attributes, Algebra has all the cards to contend with Uniswap V3.
Currently, users find it very convenient using Uniswap and Algebra for liquidity positions.
Algebra grants you the ability to swap crypto, provide liquidity, stake ALGB native tokens, and partake in farming to acquire additional incentives. You can achieve most of these functions with less than a dollar.
Sushi can be explained as a decentralized protocol that involves a decentralized exchange and lending market.
Motivating users to work on the platform, SushiSwap authorizes yield tools & apparatus and staking derivatives.
With the assembling of liquidity pools, SushiSwap allows users to shoot out their assets. And purchasing and selling are being carried out in these pools by traders.
In the year 2020, SushiSwap consolidated with Yearn Finance to disburse resources for development. But so far, they keep up separate tokens and systems of governance.
Curve Decentralized Cryptocurrency Exchange
Curve is a decentralized cryptocurrency exchange protocol crafted to lower fees and negligence for exchanging stablecoins.
The platform is established on the Ethereum blockchain, Curve remains the leading place to swap, not only stablecoins but also tokenized versions of Bitcoin (WBTC, renBTC, sBTC).
The fees are governed by the Curve Decentralized Autonomous Organization (DAO) and go to liquidity providers and more members of the DAO equally.
QuickSwap operates on the same liquidity pool model as Uniswap and has become well known for the speed and low fees provided by the Polygon blockchain.
This DEX is also compatible with the Ethereum blockchain so you can swap ERC-20 tokens on QuickSwap.
In the crypto market space, the exchanges listed above are among the best places to maximize your crypto assets with no mediator. Selecting the decentralized exchange that will meet your desires is significant. You can go ahead and research each of these exchanges to determine which one is most suitable for your investment goals.