In a past look at “How Best To Invest In Cryptocurrency” 4 Decentralized Cryptocurrency Exchanges To Know Please embed the image: In a past look at “How Best To Invest In Cryptocurrency” we mentioned cryptocurrency exchanges among the primary options. Simply put, these are environments in which you can buy and sell cryptos much like you would other investable assets –– say, on a commodity trading platform, or in a stock exchange.
Some of the most popular crypto exchanges at this stage are Coinbase(recommended for beginners), Crypot.com (viewed as having an attractive interface appealing app), and Gemini (promoted as a particularly secure option), to name a few. And despite some differences, these exchanges largely work in similar ways: They are centralized exchanges (or CEX), functioning essentially as companies that facilitate the secure purchase and sale of cryptocurrencies between traders.
Alongside these options though, we have also seen a steady emergence of decentralized crypto exchanges (DEX) that provide similar options for investors with a few different methods and perks. Namely, as Decrypt explains, using DEXmeans trading cryptocurrencies without an intermediary. A DEX uses smart contracts and algorithms to facilitate crypto trades without ever assuming control of the digital asset’s involved. While this approach can be more complex, and on occasion slower, some are drawn to a few benefits. Most notably, a DEX offers more privacy, less risk(due to the fact that no hackable central entity is holding or controlling coins), and more potential for innovation (in that people can mint their own coins and begin trading them through a DEX immediately).
The DEX option isn’t necessarily for everyone. But with those benefits in mind, let’s take a look at some of the popular options out there in this category.
1 – Uniswap
Considered to be one of the foundational names in the DEX space, UniSwap is a fully decentralized exchange operating on the Ethereum blockchain. And while a DEX in general can involve a little bit of a learning curve for beginners who are used totraditional exchanges, the benefit here is fairly simple: When you use Uniswap, you
are not trading cryptocurrency directly with other users. Rather, you are swapping in and out of a “liquidity pool,” which is basically a stash of tokens supplied through trading activity. This process is run and maintained by the community; users can buy Uniswap tokens (also known as UNI) to gain the ability to vote on decisions regarding
processes.
2 – PancakeSwap
In many respects, PancakeSwap is nearly identical to Uniswap. In fact, it uses the same underlying code. The primary difference is that it does not operate on theEthereum blockchain. Instead, the PancakeSwap DEX uses the Binance Smart Chain, which serves two purposes. The first is that PancakeSwap users gain access to assets
developed on said smart chain (known as BEP–20 tokens), as well as relateddecentralized apps –– though it should be noted that only some 290 coins as of 2021can be traded on this exchange, as compared to well over 5,000 on Uniswap. Thesecond, and perhaps more significant purpose is that the Binance Smart Chain facilitates lower fees for transactions than Ethereum. The difference is slight (0.2% as compared to 0.3% on Uniswap), but for high-volume traders in particular it can make a difference.
3 – Sushiswap
Sushiswap is an even more direct imitation of Uniswap than is PancakeSwap. ThisDEX also uses the source code of Uniswap to put forth a simple and intuitiveplatform for traders who prefer a decentralized environment. It supports trading ofwell over 1,000 coins and uses a similar community voting system to that of Uniswap (with users acquiring the SUSHI coin to gain voting ability on operations. Sushiswap also has an identical 0.3% fee for transactions. The main benefit for Sushiswap users is that when users deposit coins to contribute to liquidity funds, they can earn SUSHI tokens –– almost as a form of mining resulting in what somewould consider being free tokens.
4 – Curve Finance
The curve is another Ethereum–based DEX option and one that is built specifically to provide stability to traders. It takes a more low–risk approach by prioritizing stablecoins, which are generally less volatile than other crypto assets. As a result of this focus, the liquidity pools in Curve are more stable, leading to less potential both
for significant gain and for major losses. It’s been suggested that this helps the DEXto function essentially as a decentralized crypto savings account, wherein people can store wealth in liquidity pools –– and earn native CRV tokens while doing so.
There are by now a lot of DEX options out there for those who prefer this style of crypto exchange. But the four described above represent some of the most prominent platforms and showcase some of the perks and advantages that people see in decentralized exchanges. Such exchanges can be a little more complex for
beginning users, but if you want to prioritize privacy, lower your risk, and potentially earn some free tokens, they’re well worth exploring.