Cryptocurrency has had its ups and downs over the past few years, however, the overall market cap has increased significantly. As such the trading volume and number of exchanges increased as well. Most trading is still performed on centralized exchanges (CEXs), though many users prefer to trade using decentralized crypto exchanges (DEXs). Herein, we will first explain the main difference between DEXs and CEXs, and address some pros and cons of each. To give you a few pointers, we will list 5 currently most popular DEXs.
Centralized vs Decentralized Exchanges
Before we can talk about crypto exchanges we must explain the main difference between centralized and decentralized exchanges.
When it comes to decentralized exchanges, their main advantage over centralized ones is the fact that they actually enable direct cryptocurrency transactions between the seller and buyer. DEX is essentially a peer-to-peer (p2p) online service. They don't store users coins nor their personal data.
On the other hand, there is a third party involved in every trade made using CEXs. Furthermore, they store users coins and all users must be identified.
Each, DEXs and CEXs, have some advantages and disadvantages. The trading volumes on CEXs are much bigger than on DEXs and transaction speed is normally higher on CEX as well, which means you will sell or buy coins easier. CEXs also have a user-friendlier interface and advanced customer support, while DEXs are basically self-serviced.
The main advantage of DEXs is that they have a lot lower risk of hacking attacks. Further, as the trade is done directly between the interested parties, there are no transaction fees taken by the DEXs.
Most Popular Decentralized Crypto Exchanges
The popularity of an exchange can be determined in many different ways, however, the most tangible indicator is the trading volume. Below we prepared a list of 5 DEXs with the highest trading volume over the last 3 months. Further, we added two extra DEXs that are gaining significant popularity and could be big in the future.
IDEX allows users to trade ERC-20 tokens. It is known as one of the best for this sort of trading and it has the largest trading volume among DEXs.
It holds second place in the trading volume. While IDEX represents 24% of the volume trades among all DEXs, EtheDai accounts for a noticeable 21%. Eth2Dai basically replaced Oasis, with its complete focus on eth/dai trading pair.
Uniswap made an extra effort to ensure liquidity is always available. They implemented an automated algorithm that adjusts to the current market situation to make sure that trades are settled.
Both, Bancor Network and Kyber Network function in a similar way, they employ the reserve method. After the trade is placed by the user, the network searches for the most favorable counterparty according to the terms set by both parties,
Similar to Bancor, Kyber Network is a DEX interface that connects to different exchanges. As such, it might be viewed as a type of reserve bank that holds stacks of different cryptocurrencies. As such it allows instant trading of ERC-20 tokens.
Since Binance is one of the most reputable CEXs and the one with the largest trading volume, their DEX, which is built on top of Binance Chain definitely deserves to be mentioned. At the moment it doesn't have a large trading volume, however, they have shown that they are capable of creating powerful and reliable platforms.
Bisq is a registration-free application. The trading takes place on a global pear-to-pear network of users running Bisq on their machines. Unlike many other DEXs, this one is rather easy to use and allows exchanging cryptocurrency for national currency.
If you decide to trade using CEX or DEX make sure you know the risks and basics before investing any money. Get familiarized with smaller amounts before executing any serious transactions and trades.