Cryptocurrency exchanges are the biggest tools used in the crypto industry at the moment. The first crypto exchange was created in 2010, and then many others made their entry into the market, improving the accessibility of cryptocurrencies. However, centralized exchanges have posed significant limitations that restrict the potential for large-scale usage. Therefore, the best decentralized exchanges have emerged as helpful alternatives for crypto traders.
The examples of centralized crypto exchanges such as FTX set the wrong precedent for crypto users. On top of it, the frequent complaints about downtime on popular crypto exchanges such as Coinbase also showcase the crypto industry in bad light. Let us find out how decentralized exchanges solve the problems found in centralized exchanges and a list of popular decentralized exchanges you should try in 2024.
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How Does a Decentralized Exchange Work?
You can compare the different entries in a list of decentralized exchanges with an enhanced understanding of their working mechanism. Decentralized exchanges, or DEXs, are peer-to-peer marketplaces that remove the single points of failure evident in centralization. As a result, they help take away most of the risks associated with centralized exchanges.
Aren’t they meant to be the perfect solutions to problems with centralized exchanges? Do DEXs address only the risk of single points of failure? The first generation of DEXs aimed at replicating the user experience of centralized exchanges and used order books. However, such types of decentralized exchanges presented difficulties in usability and were expensive and inefficient.
The reputation of decentralized exchanges improved when Automated Market Makers or AMMs were introduced in DEX design. Most of the top decentralized exchanges use AMMs, which are smart contracts that can automatically set the price of crypto assets on the basis of supply and demand.
The new decentralized exchanges could allow anyone to swap tokens in a trustless environment and lock their tokens in liquidity pools. AMM smart contracts are responsible for establishing the exchange rate and the rewards for liquidity providers. At the same time, AMMs also offer an intuitive user experience in decentralized exchanges.
The first entry among the most notable DEXs is 1Inch, which offers the advantage of combining the best features of different DEXs. 1Inch helps you avoid confusion with queries like “Which is the best-decentralized exchange?” as it is a DEX aggregator.
It works by finding the best prices by comparing liquidity across different decentralized exchanges. Crypto investors can rely on 1Inch for freedom from transaction or withdrawal fees. On top of it, 1Inch offers support for different crypto wallets, thereby ensuring better accessibility to the crypto space.
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Order-based DEXs did not match up to the challenge of achieving better solutions to issues of centralized exchanges. However, dYdX still enjoys popularity amidst AMM-based DEXs. It offers many features like shirt selling, leveraged trading, and lending.
Therefore, it is a better alternative than simple AMMs. dYdX is a promising addition to the most popular decentralized exchanges, and it combines multiple features in one package. It offers a user-friendly interface, deep liquidity, and advantages of low fees.
Uniswap is the leading decentralized exchange in the market, with a wide user base. It offers liquidity for the most popular crypto tokens and leverages AMMs for self-regulation. The DAO governance makes Uniswap one of the best-decentralized exchanges with better efficiency and transparency.
On top of that, Uniswap is the first decentralized exchange in the world to offer flexibility for trading ERC20 tokens. Uniswap also has its native token, UNI, which allows the owners to provide liquidity to the exchange and earn rewards. However, it has some limitations, such as offering support only for EVM-compatible crypto tokens.
PancakeSwap, as the name implies, has some similarities to Uniswap and other AMM-based decentralized exchanges. It is the most innovative solution on Binance Smart Chain, which contributes to lower gas fees for users. PancakeSwap is a worthy contender in this list of decentralized exchanges for its emphasis on user experience.
Users can also stake the native tokens on PancakeSwap to earn rewards alongside capitalizing on the flexibility for yield farming. Most important of all, it offers faster transactions than Uniswap and a bevy of user-friendly features, making it a top DEX.
The next top name among the biggest decentralized exchanges is Curve Finance. As a matter of fact, Curve Finance is the second biggest decentralized exchange on Ethereum in terms of TVL. Initially, it offered the facility for stablecoin swaps only. However, it has evolved and offers many trading pairs now.
On the other hand, the optimization of Curve Finance for stablecoin trading makes it the best pick for low-slippage rates. Another impressive feature of Curve Finance is the support for multiple blockchains alongside better efficiency for larger transactions.
Balancer is another popular choice among decentralized exchanges for its unique features. It is a prominent answer to questions such as “Which is the best-decentralized exchange?” because of its capability to help users manage a diverse portfolio. The DEX offers the flexibility for creating and joining pools with a combination of eight different crypto tokens.
Balancer is the ideal decentralized exchange for anyone who wants to manage a diverse portfolio of crypto assets. Balancer also caters to the needs of traders seeking advanced strategies to offer liquidity. The diverse asset exposure opens up the prospects for landing compounded returns.
Another prominent derivative of Uniswap, which has garnered popularity for its distinctive set of features, is SushiSwap. The primary objective of creating SushiSwap was to offer a better alternative to Uniswap with better rewards.
However, it has developed its own unique identity with diverse features for users and a special theme for branding its user experience. SushiSwap users can swap assets and offer liquidity alongside borrowing and lending assets. It also follows the lines of decentralized exchanges that offer the privilege of participating in the governance of the protocol.
The goals of Orca also focus on overcoming the pitfalls of centralized crypto exchanges, such as ensuring faster and more secure transactions. It is one of the most popular decentralized exchanges with the flexibility for trading cryptocurrencies on Solana blockchain. The most prominent feature of Orca is the innovative UI that helps users change their language settings directly from the DEX and view token balances.
On top of that, Orca has proved to be the best pick for traders who prefer anonymity. Users can also capitalize on the advantage of trading directly from wallets and reducing the risk of losing funds to hacking or third-party mismanagement.
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The most interesting origin story among decentralized exchanges probably belongs to Vertex. It is the perfect example of how the best-decentralized exchanges can brave any odds. Vertex was created on the Terra blockchain, which suffered a massive breakdown. However, the decentralized exchange did not stop there, and all its operations were transitioned to the Arbitrum blockchain.
Vertex went through major changes in its overall structure and goals. One of the most interesting features of Vertex is the option for bridging to 8 different blockchains, which ensures interoperability. In addition, it also offers faster order-matching mechanisms that can improve efficiency of crypto transactions.
The collection of the best DEXs would be incomplete without adding the Apex protocol. It has gained popularity for offering an elastic AMM. Apex protocol is also one of the top decentralized exchanges, with the facility for order book trading. Beginners can also leverage the flexibility for spot trading on the platform.
Another unique highlight of the Apex protocol is the Starkware layer 2 scalability mechanism that also addresses security concerns. As a matter of fact, Apex protocol has gained popularity for offering improved privacy and security features.
How Can You Choose the Right DEXs?
As you can notice, there are multiple decentralized exchanges in the market with innovative features. Therefore, it is important to differentiate between the best-decentralized exchanges to find the ideal choice for your requirements. Interestingly, a few factors can help you choose the best DEX according to your needs.
First of all, you must check the blockchains on which the decentralized exchange operates, as it would dictate the level of interoperability. Another important criterion for evaluating a decentralized exchange is liquidity. Without sufficient liquidity, traders might have to face the negative consequences of slippage.
You must also evaluate a decentralized exchange on the basis of whether it is open or permissioned. For example, certain DEXs only allow the community members to add new liquidity pools. Most importantly, you can compare the best DEXs on the basis of their security features.
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Final Words
The growing popularity of decentralized exchanges has become a major highlight in the crypto space. They are more efficient, secure, and faster than centralized exchanges. Most important of all, the continuously expanding list of decentralized exchanges brings new options for staking and yield farming.
DEXs such as Uniswap, PancakeSwap, SushiSwap, 1Inch, and Vertex serve as the big players in the market. As the demand for decentralized exchanges continues to grow, the number might go beyond hundreds into thousands. Learn more about the working mechanism of decentralized exchanges and best practices to use them right now.
*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!
