There are different ways to exchange one asset for another in the crypto space. It could involve using centralized exchanges or decentralized applications. Centralized exchanges are custodial in nature, meaning that they hold the funds of users and have control over what occurs in the platform. As a way of safeguarding the crypto holdings of their users, they store a bulk of it in cold wallets. A typical custodial exchange requests that potential users undergo the KYC process and without it, they are either not allowed to use the blockchain-based services or restricted on what services they can enjoy.
What does DEX mean in crypto?
A DEX exchange is a trading platform that allows people to buy and sell their crypto assets and trade directly with other users. Traders use this type of trading platform when they want to exchange cryptocurrencies at market price without the intervention of a centralized authority. Usually, there is no middleman that can decide what occurs in the ecosystem. Decentralized Exchanges tend to work with self-executing agreements, removing the need for a third party to hold the funds of different participants. Gas fees are usually cheaper in this type of exchange, and some of them offer no withdrawal fees.
What are the types of decentralized exchanges?
Decentralized exchanges come in different formats. Some are automated market makers, order books decentralized exchanges, and decentralized exchange aggregators.
Order Book DEX
This type of DEX crypto exchange has a record of every buy and sell order for different pairs. When a trader makes a buy order, it means that they want to buy or bid for a cryptocurrency, and a sell order states that the trader is interested in selling. Order book DEX comes in two types, and they are the off-chain order books exchange or the on-chain order books trading platform.
Automated market makers (AMMs)
AMMs use smart contracts to solve their liquidity issue. Trades are executed on this platform through smart contracts that are holding tokens. It does not use order books of any kind, instead, pre-funded pools of assets are utilized. The pre-funded pools of assets are called liquidity pools.
This type of DEX crypto exchange allows users to exchange one asset for another without having to trade with any other person. It is a peer to contract type of trade. In this case, crypto enthusiasts trade with smart contracts.
Liquidity pools are filled with cryptocurrencies by different people who are called Liquidity Providers. Liquidity providers are rewarded with the transaction fees earned from those that trade on the exchange. Anyone is allowed to deposit their tokens in a pool and they are given LP tokens to showcase their percentage of ownership of the funds in the pool. Usually, the rewards are shared based on how many tokens the user provided in the pool.
An example of a DEX crypto exchange that uses this is UniSwap.
Liquidity providers face different types of risks when they offer liquidity. Firstly, if the pool is compromised and drained, they could lose all their crypto assets. In some cases, the tokens may never be recovered from the attackers or reimbursed by the decentralized protocol hosting the liquidity pool.
Another risk is an impermanent loss that may occur when two assets are deposited for a specific trading pair.
If one of the assets is far more volatile compared to its counterpart, it could lead to one asset being lowered in the liquidity pool.
DEX aggregators
This type of DEX crypto exchange solves liquidity issues by aggregating liquidity from multiple decentralized trading platforms. This is done to reduce slippage that may occur on larger orders. It also reduces swap fees and ensures that the users access the best rates in the market. Some DEX Aggregators use liquidity from centralized exchanges to satisfy their users’ needs.
What are the examples of decentralized exchanges?
The crypto market has a lot of decentralized exchanges that crypto enthusiasts can use in making trades
Before using any exchange, please do your due diligence. Different DeFi ecosystems have varying uses and features. It is crucial to do your research before settling on anyone.
Whalesheaven
Whalesheaven is a peer-to-peer custody-free exchange that is designed to allow traders to buy and sell different types of tokens no matter the amount. While doing this, it offers the highest possible deal protection.
With this trading platform, people can trade their private tokens and stable coins and get them at the best rates available in the market.
As a custody free exchange, the user does not have to leave their funds with anyone. They can seamlessly trade their tokens without giving custody to anyone in this DEX crypto exchange. As one of the top decentralized exchanges, the private keys are held by users.
Whalesheaven is a decentralized exchange, meaning that there is no central authority that can decide what happens in a transaction or seize the accounts of users. Trading fees are very affordable, making it easy for people with any trading volume to use the services without paying a lot in commission.
Using Whalesheaven comes with a free withdrawal fee, meaning the user pays nothing to withdraw their cryptocurrencies to any wallet.
When a trader is looking for how to sell a large trading volume of tokens without being worried about volatility, they can do it on Whalesheaven. Whalesheaven allows people to sell large amounts without interfering with price and keep their interest regardless of market direction.
For those that have been looking for ways to automate their trading activities can do that seamlessly using the WH Cypher.
Not minding that Whalesheaven is decentralized, it offers secure deals through the usage of multi-sig wallets. This offers the best-decentralized protection for your funds that is available today.
Trading on this decentralized exchange is quite seamless as all the user has to do is create an auction by setting the volume and submitting it to the platform. Once this is done, they get offers from potential buyers. If a buyer is gotten, the seller is notified through SMS, Telegram or email.
Now, that a buyer is found, they can begin trading in a safe environment, where their funds are protected throughout the whole trading process.
This decentralized exchange is private, allowing the users to trade in anonymously. Traders can decide to upload Source of Funds documents or remain completely anonymous. The decision is theirs.
Whalesheaven is the home of a myriad of cryptocurrencies, giving traders the opportunity to access multiple currencies.
AirSwap
AirSwap is a peer to peer trading platform on the Ethereum network that allows people to exchange their tokens seamlessly. It has little or no slippage, and works mostly on desktops and laptops.
1inch Exchange
This exchange acts as both a decentralized exchange and a DeFi aggregator. To minimize price slippage, the exchange is linked to multiple centralized and decentralized exchanges.
Its aggregator uses the Pathfinder algorithm that finds the best rates on multiple platforms. Users can provide liquidity in any of its pools to earn rewards. With its features, traders can also move their crypto holdings from one lending protocol to the other.
Bancor
Bancor is a decentralized exchange that offers trading features to its users. People are allowed to provide liquidity in the liquidity pools, and earn rewards. Crypto enthusiasts can use the protocol to enjoy automated, decentralized token trading on different networks. Users can stake their tokens on the Bancor protocol. There are no sign-up processes, KYC or registration of any type.
DODO
DODO is a DEX exchange that offers liquidity to trade different types of crypto assets on a myriad of blockchains. It uses a unique Proactive Market Maker (PMM) algorithm that offers different types of liquidity solutions.
Users can buy and sell any type of crypto assets on this exchange. Usually, it offers great rates by comparing the different prices of the token. It caters to tokens from multiple networks.
DeversiFi
This Ethereum-based exchange offers people access to decentralized trading activities, as well as margin trading, and spot trading. With the exchange, people can access different features like sending, buying and selling cryptocurrencies. Traders can manage their portfolios on the platform. It also acts as a DEX Aggregator, getting liquidity from other platforms and its AMMs.
Conclusion
There are different types of decentralized exchanges in existence. Depending on what a trader intends to achieve, they can opt for the one that ticks all the necessary boxes. Many of these decentralized exchanges are listed above except for our exchange, Whalesheaven does not provide a shield against volatility. This means that if a trader sells a large volume of tokens, it could negatively affect the market conditions. A situation like the aforementioned does not exist on Whalesheaven.
Some exchanges offer a lower transaction fee compared to others. In some cases, Decentralized Exchanges like Whalesheaven do not charge a dime on withdrawals. The likes of our exchange offer a wide variety of crypto assets to buy and sell without custodial authority in a safe environment.