Top 3 Decentralized Exchanges for Cryptocurrencies in 2018
What’s a Decentralized Exchange (DEX)?
A cryptocurrency exchange allows the general public to buy cryptocurrencies with their cash or vice versa. In a decentralized system, the transactions are matched and executed using smart contracts, instead of being controlled and executed by a closed system comprising of one or a group of control servers. The decentralized system frees the funds from the control of a third-party intermediary.
On the other side, we have the centralized exchange that can be further classified into Custodial and Non-custodial Exchanges. It’s believed that more than 95% of all cryptocurrency transactions are carried out via the centralized exchanges. Of these, around 73% of transactions flow through the custodial exchanges.
For many, this isn’t surprising, but the situation can change pretty quickly. In fact, some experts are predicting a complete reversal of the trend in the near future.
After all, the very purpose of blockchain and cryptocurrency gets defeated if a centralized party controls the asset transactions. The allure of blockchain is decentralization and the DEXs help the users retain the control over the assets.
It cannot be denied that DEX suffers from a few shortcomings, but it’s still evolving. Decentralized Exchanges that are active today are fast becoming popular and to attract new users and retain the trust of the existing customers they are plugging the holes in the DEX model.
The Decentralized Exchanges Are Coming: The Reasons behind the Rise
The reasons why DEXs will eventually absorb all the transactions of the digital currency assets are precisely the ones why cryptocurrency and blockchain were created. So, how are the DEXs better than the centralized exchanges? Let’s find out.
The Way the Funds Are Controlled
In a centralized exchange, when funds are deposited to further a transaction, the funds stay in the control of a centralized service. The centralized service also maintains the order-books of the transaction.
No centralized server or service is involved in the transaction in the case of a decentralized exchange. Here, the trading of assets is peer-to-peer (P2P). People who are part of the platform have the custody of the funds and order-books; a centralized service or server is mostly absent.
Privacy and Anonymity
Until a few years ago, cryptocurrencies didn’t insist on the identity of the person trading on virtual assets. The extension of Anti-Money Laundering Laws to cryptocurrency exchanges and the introduction of government regulations forced users to shed anonymity.
Decentralized exchanges are working on finding a balance between anonymity and the rule of law.
Authorization of Transactions
In a centralized exchange, the trading/transactions are authenticated and authorized by a third-party intermediary, such as the platform itself.
In DEXs, through a series of blockchain protocols and smart contracts, the cryptocurrency transactions are facilitated.
The Top 3 DEXs in 2018
We begin the list with the best. Yes, IDEX is the most popular and feature-rich decentralized exchanges you’ll find on the internet today. The DEX was launched in 2017; IDEX is just one-year-old. In its short, exciting, and eventful journey so far, the exchange has added many firsts to its name.
The IDEX decentralized exchange is the first to accept trading in more than 200 tokens, including Ethereum. The platform runs on the DAO blockchain network and supports real-time trading. Advanced features such as instant market orders, instant order books, and instant gas fee-free cancels have made IDEX the Number Uno decentralized exchange with the highest trading volume.
IDEX addresses some of the concerns people have about the decentralized exchanges. IDEX boast of a clean and easy to use platform with robust security features. Users will also find simple, yet informative guides that will hand-hold the users through the various modules, features, and functions of the platform. The platform also provides the users with tools for technical analysis.
As an added security measure, the IDEX cryptocurrency exchange allows the use of Ledger Nano 5 and MetaMask. Furthermore, IDEX also lets users earn a few extra bucks by providing a staking program.
The Stellar DEX (SDEX) isn’t even a year old, but the team behind this decentralized exchange forayed into the cryptocurrency industry back in 2014 by launching an easy payment system.
Stellar DEX allows trading in both cryptocurrencies and a few fiat currencies. On Stellar DEX, users can buy and sell Chinese Yuan, Hong Kong Dollar, Japanese Yen, US Dollar, Litecoin, Ripple, Ethereum, and Bitcoin.
To facilitate trading, the Stellar DEX provides users with several features; chief among them is the atomic pathfinding that searches and presents the users with the best trading assets.
In Stellar DEX, the platform requires its users to create a key pair comprising of the Public Key and Secret Key. The former is used to id the account and receive funds and the latter gives the users access to their account and carry out transactions. To trade on the Stellar decentralized exchange users are required to pay 20 lumens.
Waves known for its cryptocurrency and blockchain technology launched its own decentralized exchange last year. The Waves DEX allows trading in 72 tokens and has a decent 24-hour volume of around $6,000,000.
You can use Waves or any other platform-supported token to trade in cryptocurrencies such as Ethereum, Bitcoin, etc. Tokens that are supported by the Waves platform also include Litecoin and Zcash.
Waves DEX can be easily referred to as a hybrid of both centralized and decentralized exchanges. The Waves DEX platform has incorporated the best features of both concepts. From the centralized exchange the platform has adopted the centralized matching service feature and like every other decentralized system, it gives the users control over the funds.
The 3 decentralized exchanges mentioned here lead the pack. A casual search on the internet will give you a long list of DEXs, but they have very low trading volume, are still in the testing stages, or being built.
The DEX arena is changing fast, new players are making a beeline with innovative ideas and technologies, so the ones occupying the top 3 spots in 2018 might be relegated down the list within a few months. The future is bright for decentralized cryptocurrency exchanges and we have exciting times ahead of us.