Decentralized Exchanges: Cryptocurrency Trading & Transactions to become more secure than ever.
The irony is when we've been using centralized exchange platforms for a decentralized application. For some reasons, we've already known this since the beginning. We've stomached the thefts and cryptocurrency hacks on the exchange platforms.
One side we were helpless, on the other side we were desperate to invest or use cryptocurrency as payments. So far, the only option we had, was to use centralized systems to trade in cryptocurrencies. Unlike blockchain technologies, the exchange platforms weren't decentralized. Because of this, we've seen thefts from the exchanges and lost millions in that. We all know what happened to Mt Gox, it's one of the biggest cryptocurrency thefts to date.
In this post, we will be talking about the decentralized exchanges and best decentralized exchanges.
Without further ado, let's dive in directly.
What is Decentralized Exchange?
A decentralized exchange platform can help in many ways in maintaining the essence of the blockchain technology and exchange platforms. Here's what we think makes an exchange eligible to be a DEX:
- An exchange that lets the users to control their funds on their own terms. The exchange platforms have the private keys of the users which is vulnerable to the attackers.
- Unlike all centralized systems, a decentralized exchange platform should not have a single point of failure.
- To preserve the values of blockchain technology, a DEX shouldn't have any third parties directly or indirectly linked to it. Like centralized exchange platforms have third parties with or without our knowledge.
- An exchange is a public property, no government should shut it down as China did to the domestic bitcoin exchanges.
- Everyone owns the exchange, not individual companies.
- Privacy is the main concern in a DEX. It shouldn't ask for KYC verifications & registrations (though its a security issue)
Benefits of using Decentralized Exchange
Considering all the hype, decentralized exchange definitely has some benefits that are second to none. Let's take a look at the benefits:
- DEXs are in favor of the main reason for using decentralized currency. There is no point in running a decentralized asset on a centralized platform. Centralized architectures have a single point of failure and hence there is a very heavy chance the platform getting compromised. Basically, the DEXs make the platform a true fit for the most used blockchain application, cryptocurrency.
- DEXs will further help the digital assets be safely transferred and hence the digital assets will thrive in its own way
- Decentralized exchanges are above the censorship of the government or any individual company. It is the people who rule here, not a central authority.
- Users can be their own banks. The funds are under the supervision of the users itself yet it's safer than ever.
- Decentralized exchanges do not have downtimes as the network is spread across the globe. Just like the blockchain technology itself, DEXs have a presence all over the globe.
- Many tokens and cryptos will get the exposure to the world that was not possible due to the rules and restrictions of the centralized exchanges.
Sure, DEXs have a lot of personal benefits that users will see once it becomes as common as the centralized systems are now. But, it's not that sweet right now. There are some drawbacks to that users will definitely not like, Let's take a look at it in the upcoming section.
Drawbacks of Decentralized exchanges
Though lesser than the benefits, there are surely some drawbacks.
- The cryptocurrency itself is a complex concept for the users to stomach easily. Having a decentralized exchange platform that the users will be using in day to day life is not going to be as easy as ABC.
- For now, the DEXs will have limited function excluding the margin trading, stop losses, bot trading & margin lending etc.
- Most of the DEXs are in the testing phase, which means investing in it will be a risk of losing it.
- Problems like incomplete payments, frauds, unsuccessful transfers and many more like those have no central place to be addressed.
These benefits and drawbacks won't make sense without a practical explanation. That being said, let us show you some decentralized exchanges.
Top 9 decentralized exchanges that you can use to trade right away
A perfect alternative to EtherDelta, IDEX is a decentralized exchange platform that allows users to trade ERC-20 tokens. The exchange is way better & user-friendly than EtherDelta. When it comes to volume, IDEX is a top decentralized exchange platform.
At IDEX you can use the analysis tool for doing TA and charing. These guides will help you better in getting started with IDEX. Furthermore, IDEX is fully compatible with Ledger Nano S and as you already know, hardware wallets are the best way to secure the digital assets. With decentralized exchange like IDEX, you will double the security easily.
Note: Don't forget to back up a copy of password/phrase/private keys of your account. That's the only way to access your funds, if you forget it there's no way to regain the access to the funds.
#8 Waves DEX
Waves is a cryptocurrency which has now added the blockchain flavor to its core and comes up with Waves DEX or Waves Decentralized Exchange. For example, iOS apps can be developed only on mac pc or mac book. You cannot develop iOS apps on Windows or Linux. The product and the platform are owned by Apple. Similarly, waves cryptocurrency and WavesDEX is owned by the same company. This will definitely pedal up the exchange process on the decentralized exchange platform.
WavesDEX is a decentralized exchange platform that is built on top of waves blockchain. It allows users to trade BTC/ETH etc in exchange for waves cryptocurrency. You can even issue any token on the platform.
#7 OpenLedger DEX (Bitshares)
OpenLedger is a blockchain based company from Denmark. OpenLedger provides decentralized solutions to the cryptoverse. On top of Bitshare’s graphene technology, OpenLedger runs a decentralized exchange that serves as a really good alternative to the traditional centralized exchange.
Furthermore, the registration process on the DEX is pretty straightforward, there is no KYC involved. Since there is nothing as part of KYC, it’s only your ID & password that let's access the account. If you forget the ID and/or password, your account is locked forever. Password will not be the typical potatoe8 type, it’s gonna be something like this - P5K8qu91RAGxbc2xnH9sKvhCb31ocokr1XOKLmVXfBQFP
Not an easy thing to remember right? So back this password somewhere who’s password is easy to remember, Google keep or something similar. Make sure no one other than you can access those note saving apps. Even if someone does, it should be someone reliable.
Again, Bitshare network comes into the picture. CryptoBridge is a newcomer in the Decentralized exchange race. The platform supports almost all altcoin pairs for trading and hence you can easily trade various altcoins with utmost safety.
You own the private keys and the system doesn’t store the private keys anywhere on the system. The same risk again, if you lose your private key, even the platform will not be able to help you gain access to it.
On the features front, CryptoBridge has some outstanding USPs as follows:
- It has a native BCO token called BridgeCoin. You can trade that right on the platform.
- If you buy the token from their platform, you get to share a 50% revenue share on those tokens you own. Sure, a marketing strategy but hey, you’re not at loss. Are you?
- Thanks to the federated servers, there exists no single point of failure.
The registration process is simple, you need to come up with a unique username and a cryptographically generated password will be generated. The password will be alphanumeric and long. Therefore, remembering it will be difficult, so store it somewhere safe.
MarkerDAO owned OasisDEX is a decentralized exchange that allows you to buy cryptocurrencies. However, the platform is in alpha stage and not safe to trust your money on.
You will need to make an account on MetMask first and then access the platform. That’s because it is an Ethereum DApp.
Radar Relay, is a decentralized exchange that allows you to trade Ethereum tokens without needing to rely on any middlemen. You will need MetaMask wallet beforehand to use the platform. Furthermore, you will need to load Ethereum to pay services like Gas fees.
This platform doesn’t have enough volume to try trading, but you can always give a try. Just take care of the recovery phrase of the MetaMask wallet because that’s the only doorway to this platform.
BarterDex is probably the most advanced decentralized exchange platform, thanks to the groundbreaking technology it uses. It’s the atomic swaps & that’s what the platform is powered with.
As of now, BarterDEX is owned by komodo that has recently crossed 60,000 atomic swaps on the platform. Furthermore, the company is working on releasing a GUI based wallet for Windows, Mac & Linux. The wallet is expected to roll out soon and it will have much smooth and user-friendly UI.
A P2P marketplace for cryptocurrencies like Bitcoin. It is absolutely decentralized exchange platform which doesn’t require name, ID or verification.
Bisq uses Tor to make the platform ina real sense. Furthermore, it doesn’t store fiat or cryptocurrencies on their servers. It directly goes to your account and the receiver’s account.
As of now, it supports a whopping 126 cryptocurrencies. However, trade volume is low. Here’s an introductory video about Bisq:
Stellar is already a cryptocurrency. Now the blockchain network has come up with a native decentralized exchange. To use the platform, you will need to create key pairs which contain two important components:
- Private Key
- Secret Key
If you are already an investor for quite some time, you wouldn’t find this new. A public key is useful to access your account on the DEX. It is also otherwise known as account itself. When receiving funds, you should provide this key to the sender.
A secret key is something really important. This key is needed to access your account and view the account details. Also, this is the key required to make transfers. Therefore, we advise you to keep this key safest. Anyone with access to this key has the potential to empty your account in a few clicks.
When register on the Stellar DEX, your secret key will look something like this –
Unlike the other decentralized exchanges, you will need to deposit 20 lumens to activate your account and begin trading.
Future of Decentralized exchanges
DEXs have a bright future. If not right away, soon it will be a fantastic view for the users to spend time and money on DEXs. That's the only way to make the blockchain technology in the cryptocurrency network a success. Though fewer, drawbacks are good said no man ever.
For now, you might see DEXs as incapable of performing to the potential it ought to perform. The crypto markets are having frequent unpleasant events in China, North Korea & Russia that has banned centralized exchange platforms for obvious reasons. This has given a valid reason for a decentralized exchange to show up and rule the market.
Final thoughts on Decentralized exchanges
There are a ton of other new & better decentralized exchanges that are under development. Bittrex is one of them. At Bitfolio, we are awaiting more details on this and we will keep you posted on this as soon we have an update. We already have the official update that Bittrex is working on a DEX.
It’s gonna be huge. It’s worth the wait.
Apart from this, there few under development projects as follows:
- Bancor liquidity exchange
- Counterparty Exchange
- Altcoin.io [Atomic Swap Powered- under development]
- Airswaps [Under development]
- EtherDelta [did not cover as there was a recent breach]
On one side, the DEXs is a great way to keep your funds absolutely safe. On the other hand, the absence of KYC and verification, will open a room for many illegal activities and even the authorities will not be able to trace it.
Decentralized Exchanges have the potential to make cryptosphere stronger than ever. The future seems promising and exciting with more and more DEXs showing up.
There you have it. A good knowledge on Decentralized exchanges. It’s time for us to hear from you. What do you think of DEXs? Let us know in the comment section.
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