In the world of finance and cryptocurrency, there are two types of exchanges: centralized and decentralized. The former is a market structure that consists of having all orders go to one central exchange. It lacks the inclusion of another competing market. The other involves decentralized exchanges, which exhibit noted benefits but are still very new and may include new risks. This DEX review will delve into some of these exchanges so you can get an idea of how they work and what’s in store in the future.
There is a strong sense of paranoia that surrounds a centralized exchange. While they are generally seen as good and functional, they are not the safest system in the world. People who use these exchanges often worry about losing their cryptocurrency to thieves and hackers. Despite these fears, we have no choice but to use them. Why? Because there aren’t that many options for decentralized exchanges. A majority of these infrastructures and exchanges are still under construction.
Be that as it may, there will come a time when the decentralized infrastructure is ready to go. When that day comes, it will no doubt breathe a new life into the world of cryptocurrency. It will allow people to engage without ever needing to worry about the well-being and safety of their funds. That reliability is something that will attract crypto enthusiasts all over the world.
The question that remains is which DEX exchanges are the best? This article will provide some suggestions to look into this year and beyond.
What is it?
We have already briefly touched upon what these types of exchanges are. However, before we move forward in giving examples of the best ones, we need to shed more light on the concept.
A decentralized exchange (DEX) is a cryptocurrency exchange that operates in a decentralized manner. In other words, without the presence of a central authority. Moreover, these exchanges permit peer-to-peer trading of cryptocurrencies.
On decentralized exchanges, there is no need for users to transfer their assets to the exchange. For that reason, these exchanges effectively cut down on the risk of theft from an exchange hack. In addition, they can prevent the manipulation of prices or false trading volume by way of ‘wash trading’. This is when an investor simultaneously sells and buys the same financial instruments, thus creating deceptive activity in the marketplace. These exchanges are also comparatively more anonymous than exchanges that incorporate Know Your Client (KYC) requirements.
Contrary to the centralized market model, decentralized markets are growing with the evolution of computer technology. Specifically, what is actively giving people the ability to participate in online commerce without the benefits that come from a centralized market? With centralization, you visit a website that provides a central meeting place for buyers and sellers. With the emerging style of decentralization, it directly connects buyers and sellers to each other for trading purposes.
Learn more in our article: How to Read an Exchange Order Book – For Crypto
A few examples of decentralized markets include:
- Forex Market – The foreign exchange (forex) market is a great example of a decentralized market. This is on account of there being no one physical location where investors go to buy and sell currencies. Forex traders are able to use the Internet to check the quotes of currencies from an array of dealers. And not just in a few specific regions, either; from all around the world.
- Real Estate – Traditionally speaking, real estate is sold through a decentralized market. In these exchanges, buyers and sellers execute their transactions without first channeling the process through a clearinghouse.
- Certain types of securities – There are a variety of bonds and secure products that are often acquired through decentralized markets.
Pros & Cons
The intent of decentralized exchanges is to execute the same scale as centralized alternatives. All without the involvement of a central authority – or engine – to carry out trades. Like a lot of blockchain solutions, this task shares the quality of being extremely challenging. By trading away speed, pair variety, and sleek interfaces, they offer so much more in regards to security and anonymity.
There are many people who are taking an interest in cryptocurrency, especially from the traditional finance sector. For them, trading popular cryptocurrencies such as Bitcoin or Ethereum appears to be somewhat precarious. There are a few exceptions, but the dominating threat of hacks is still a major hindrance.
Malicious agents have been successful in their attempts to tap into various centralized exchanges. By doing this, they are able to obtain critical user information to make off with funds. Furthermore, there are cases of losses that surpass multi-million dollar figures. This has serious consequences on the image of the crypto space as a whole. The lack of security ruins the idea of the crypto space being a potential competitor to conventional exchanges worldwide.
As you’ll see from our DEX review, there’s an array of projects are showing up to meet this demand. How will they do this? Well, by applying diverse tenets of decentralization.
There are a number of drawbacks pertaining to decentralized exchanges. However, the big one ties to the complete lack of a KYC process. Without it, there is no way to revert a transaction. As a result, users find themselves at a loss if they are ever a victim of hacking. Whether it be for their passwords or private keys, they are in a vulnerable position.
The effects of obstacles
There was once a time when EtherDelta was the world’s top decentralized exchange. The fact that the exchange did not require any KYC policies on the platform was what made it so popular. No matter where you are in the world, you could simply log in and immediately start to trade. However, in 2019, it would make headlines for essentially falling from grace. The founder of the platform, Zachary Coburn, was charged for operating an unlicensed exchange.
“Authorities said that during its 18 months of operation, Coburn was responsible for more than 3.6m orders, with some of them counting as unregistered securities.”
Authorities would draw precedent from the “DAO Report” back in 2017. They implicated the exchange for failing to file as a securities broker with the Securities and Exchange Commission. The Commission explains its reasoning, saying that if the platform caters to American citizens, it needs to obey American laws. Those regulations also include KYC mandates.
In hindsight, the issue seems like quite an easy one to avoid. This development, however, is a prime example – among others – of the recurring obstacles facing decentralized exchanges. In fact, not just them, but crypto markets as well.
The best of the best – HedgeTrade’s DEX Review
Now that you have a clear understanding of what these exchanges are, we can get into ideal recommendations. True, this type of exchange has its flaws – what system doesn’t? – but it still holds a great deal of potential. It provides a sense of safety that could mitigate the paranoia one can feel from using centralized exchanges.
Without further ado, here are some of the best-decentralized exchanges to trade on.
1 – Changehero
Is your goal to anonymously exchange your coins? And do you need a platform that is instantaneous and powerful? If so, then Changehero is the best choice for you.
This platform is among the most popular decentralized exchanges out there. It allows you to instantly exchange cryptocurrency without ever needing KYC or Anti-Money Laundering (AML). The best part of this platform is you don’t need to know the identity of the person on the other side. As a matter of fact, everything is done in an instant.
Starting to use this exchange is fast and incredibly easy. All you have to do is follow these steps:
- Make your way over to Changhero
- Choose the coins that you would like to exchange
- Provide your wallet address
- From here, Changehero takes care of the coin exchange and will later deposit it to the address you provide
This entire process is instantaneous. What’s more, its execution is without any type of intervention.
2 – Radar Relay
Radar Relay is a decentralized exchange that deals primarily with Ethereum and whose platform uses the 0x protocol. The platform allows you to trade them all without the interference of any middleman. If you want to use Radar Relay, then you will need a MetaMask wallet consisting of ETH cryptocurrency on it. With this money, you can pay for whatever Gas fees there are.
The platform operates as an order relayer and acts as an order book. It relays orders occurring between peers without ever holding the assets of its users’ custody. Radar Relay competes with other decentralized or non-custodial exchanges including the likes of DDEX, IDEX, ForkDelta, Airswap, and Kyber Network.
With this platform, you have the ability to control your funds. Overall, the only thing that you need to manage while using this exchange is the recovery phase of your MetMask wallet. As a bonus, you can use this exchange with your Ledger Nano S wallet. If you had to compare the wallets, this one is a considerably safer option.
Key features of Radar Relay include:
- Functionality: It utilizes an interface that incorporates a variety of innovative features.
- Security: It facilitates wallet-to-wallet trading and never once does it take custody of users’ tokens.
- Trading options: It provides a wide range of trading options, plus users have access to the fee-free trading of over 190 coins.
- High liquidity: The platform relays orders between peers and at the same time, the 0x Protocol moves tokens from wallet to wallet.
- Customer support: A support team is readily available to help users who have any questions or experience any issues
3 – OpenLedger Dex (Bitshares)
OpenLedger is a blockchain-based company whose headquarters are in Denmark. It provides the crypto market with an array of decentralized solutions. They have their own decentralized exchange going by the name of ‘OpenLedger Dex’. This platform leverages BitShare’s graphene technology in order to supply its services to users. The exchange, according to the official website, aims to help users do the following:
“Create new business tools based on revolutionary decentralized networks that change your industry forever. Build your dream on our blockchain services and consultancy or create your own network and run your business totally distributed and secure.”
The process of opening an account on OpenLedger is quite simple. This is primarily due to the fact that it does not require any type of registration or KYC to start with. In reality, the only thing you need to take care of is your login password and username. This, above all else, is the only thing that will help you in case something goes awry.
Your password won’t be the standard password on most platforms or systems. It is not a word and a number or symbol. The password you use on OpenLedger will be a series of random numbers and letters. It will look something like this: P5K1qu91RAGxbc2xnH9sKvhCb31ocokr1XEKLmVXfBQFP
4 – BarterDex
BarterDex is a platform that utilizes the technology of atomic swaps. This is a piece of smart contract technology that facilitates the exchange of one cryptocurrency for another without central intermediary involvement. Because of this, one can easily say that it is the most state-of-the-art decentralized exchange that exists.
The user interface, however, is a work in progress, to put it lightly. Hopefully, with time and the right development, it will get better. It is not without its accomplishments, though. Not too long ago, it would successfully cross 60,000 atomic swaps on its exchange.
In addition, the new version of their GUI wallet is under development. Upon its completion, it will be available on Windows, Mac, and Linux. There are expectations of it being comparatively faster and much more user-friendly. For users with more experience, however, the old GUI version is available on Github.
All in all, if you consider yourself to be a tech nerd, then you can start your first atomic swap by using BarterDex.
5 – Bisq
Bitsquare is a peer-to-peer marketplace specifically for cryptocurrencies such as Bitcoin. It is an exchange that is fully decentralized and doesn’t require a name, email ID, or verification from its users. It allows those who use it to exchange bitcoin for national currencies. Moreover, they can do so without having to disclose any information that could identify them. It is an open-source desktop application whose construction and maintenance is by developers all over the world.
In order to be a peer-to-peer network that is genuinely anonymous, Bisq utilizes Tor. Furthermore, it does not preserve fiat or bitcoins on their servers, nor does it hold them in their account. Every aspect of this exchange is decentralized. From placing the order to matching the order or executing it, there is decentralization in everything.
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. However, these characteristics lend themselves to a notable drawback concerning the use of Bisq. That being – and this is important to keep in mind – trading on the platform is significantly slower.
Admittedly, the liquidity is low and the speed is slower than most exchanges. Be that as it may, Bisq takes pride in having total decentralization.
6 – Stellar Dex
Stellar is already a popular name in the world of cryptocurrency and blockchain, so it’s a shoe-in to make our Dex review. Stellar Dex is a trendy cryptocurrency and blockchain project and is an open-source protocol for digital currency to fiat money transfers. It permits cross-border transactions between any pair of currencies. Similar to Bitcoin and Ethereum, Stellar relies on blockchain technology to keep the network in sync.
According to the official website:
“Stellar makes it easy to create, send and trade digital representations of all forms of money—dollars, pesos, bitcoin, pretty much anything.”
So, why exactly is it on this list? Well, that’s because Stellar runs a decentralized exchange of its very own.
If you want to start using the Stellar network, then you must first create a key pair. Specifically, one that consists of two parts:
- Public key: The public key is what identifies the account. This public key is a useful tool for receiving funds.
- Private key: The private key is what allows you to access your account and make transactions. It is crucial that you keep this code safe and secure. Anyone in possession of this key will be able to access your funds on the Stellar Dex.
As soon as you generate the key pairs for Stellar Dex, a private key will be given to you. This key will be a random series of numbers and letters. It will look something like this: SBXNBVE5RNAGP73VGAJPB4A7OW3JHRECICCUCPGCXNI24HVGFVUXOPNU
Upon logging into the Dex using this key, you will receive a public key. At this point, there is a requirement for you to deposit 20 lumens. Doing so will effectively activate your account and you can finally start trading.
7 – IDEX
IDEX is one of the most popular decentralized exchanges in the world. Those who use this exchange manage their funds by way of the platform’s Ethereum smart contract. The only way to access this is via a private key. There are four ways in which you can open a wallet at IDEX:
- A Keystore file
- Entering private keys manually
- Through a Ledger Nano S
Once users make a connection, they need to move funds over to the exchange. They can do this by using any of the four wallets to begin trading.
IDEX offers the most complete trading experience out of most other exchanges. Once users are on-site, they are able to view trading pairs and the status of various order books. What’s more, the interface grants users the ability to establish market/limit orders. Similar to centralized exchanges, the order book receives its updates in real-time. This basically means that matching buyers with sellers is quite efficient.
However, it is important to note that IDEX is more centralized than other exchanges of its kind. This is because many of the operations are under the control of a central authority, with the exception of settling funds. As is, users are at the whim of the platform to ensure the execution of orders. As a form of compensation, users have the luxury of smoother user design and higher liquidity. Be that as it may, this model is more secure than any centralized exchange.
In August 2019, the platform saw the implementation of stricter KYC policies. Along with the quasi-centralization of the platform, this is a disadvantage for some crypto-users. Market makers need to pay a 0.1% fee on any trades. Market takers need to pay 0.2% plus gas fees in order to trade.
8 – Bancor
Our Dex review would not be complete with including Bancor. Their exchange model is incredibly unique because a second party is not essential to perform trades. In lieu of this, users can exchange their ERC-20 token for Bancor’s native “smart” Bancor Network Token (BNT). Holders of the BNT are then able to exchange them for several other ERC-20 tokens.
Any kind of ERC-20 token can go into storage on the Bancor protocol by way of a smart contract. This smart contract functions as an effective reserve for the ERC-token it is holding at that time. BNT is Ethereum-compliant, therefore its value garners support from every other ERC-20 token within other smart contracts. The overall value of this token receives automatic adjustments in relation to these various other tokens.
The platform also permits direct exchanges between two different tokens. It is a lot like an atomic swap with the only difference being that there is an extra step. For example, let’s imagine that a user is wanting to exchange Tron for XRP. On the Bancor web application, users are able to select these two coins and connect the trade to a wallet holding TRX.
The end goal is to apply improvements in liquidity for small-cap tokens. Ones that are very rarely able to find suitable markets on traditional exchanges.
9 – Kyber Network
Generally speaking, the Kyber protocol is basically a stack of smart contracts. These contracts operate on top of pretty much any blockchain. Unlike other exchanges on this list, Kyber is not technically an exchange. It takes the approach of settling various tokens from a completely different angle.
Takers have the ability to trade tokens through several network actors. For instance, Registered Reserves are liquidity providers that, upon receiving approval, can list their token pairs. As soon as they are listed, the pairs then become available to takers. It is common for multiple Reserves to offer the same token pair. In this particular case, Takers are quoted on the ideal rate for their trade.
Maintainers have special access that allows them to grant permission to Reserves applicants. Moreover, they define the parameters for the Kyber smart contracts. They also clarify how Reserves can comply within a network prior to joining.
In addition to all of this, Kyber provides a native token: Kyber Network Crystal (KNC). This token functions as an effective barrier against wash trading. Kyber actors need this token to carry out operations within the protocol. Those who hold KNC get to enjoy governance rights at the protocol level. They also have the opportunity to engage in treasury funds for additional development.
10 – Uniswap
Uniswap Exchange Protocol is a tricky exchange in that it’s one of the hardest to fully comprehend. This is mainly because it completely reverses common knowledge regarding market makers, order books, and price points. In an attempt to simplify this process, the cryptocurrency investment group, Scalar Capital, provides a clear-cut explanation.
On a conventional exchange, order books are organized by various price points and the diverse demands at each point. One order could have a buyer purchase 100 Basic Attention Tokens (BAT) for 20 USD Coin. Another seller could sell 200 BAT for 32 USDC. Let’s assume that there are hundreds of similar trades occurring on an exchange. In this case, the figure falling between the highest and the lowest bid is the price of BAT during that trading period.
All of these orders in the Uniswap mix together. The price that ultimately comes out of it is defined by an “automated market maker” (AMM). The liquidity for this trading pair is then combined and put into two categories. For example, a market may have 300,000 BAT and 55,000 USDC. Uniswap then takes these two quantities and multiply them together, getting a product of 165 billion.
11 – Binance DEX
A large amount of the current decentralized exchange platforms leverage the Ethereum blockchain’s flexibility to reach their goals. Binance, the leading cryptocurrency exchange in the world, would join the decentralized exchange movement after the launch of their blockchain
The CEO of Binance, Changpeng Zhao, said during an interview with the Changelly team that:
“Binance DEX is a decentralized exchange developed on top of Binance Chain, with low latency, high throughput, low fees and UX similar to current centralized exchanges. Oh, and you hold your keys or funds yourself. No need to deposit your funds at an exchange.”
Upon its launch, the original ERC-20 Binance exchange tokens (BNB) were subject to burning. BEP-2 format tokens became their replacements by using the Binance Chain.
When you compare it to Ethereum, Binance Chain is relatively centralized. However, liquidity on Binance DEX is actually a lot higher than most other exchanges. This is thanks to the model bearing a close resemblance to Binance’s centralized version.
12 – Loopring
Loopring is not technically a decentralized exchange itself but we thought it a worthy DEX review mention. Similar to the 0x project, it is actually a modular protocol specifically for creating decentralized exchanges on numerous blockchains. The official website refers to it as “the protocol for decentralized token exchange.”
Using a wallet interface (like Metamask) that integrates with Loopring, you can create orders. What’s more, you can sign them with the use of your private key. This will allow the Loopring protocol to withdraw funds upon the trade execution time. Basically, there is no withdrawing of funds until the order is matched. Therefore, you have total control of funds even after you place an order.
Loopring authorizes the ‘UniDirectional Order Model’. It can match up to 16 trades at a time, in comparison to single buy/sell order matching like a majority of other exchanges. Loopring typically calls it “order-ring.” The processing of these order-rings is by ring-miners via a resource-intensive procedure. This process is ‘ring-mining’. The Loopring protocol provides an incentive for ring-miners and relayers to participate in the network.
Hopefully, you’ve enjoyed this Dex review and it has inspired you to check a few of them out. Innovation is the name of the game in the cryptosphere, and decentralized exchanges are on the cutting edge.
Learn about the intricacies of DEX trading in our article: What Does Low Latency Mean for Crypto?