- Decentralized Exchanges are all the rage these days with the growing interest in DeFi.
- They offer many benefits and tackle common CEX issues.
- The top 5 DEXs of 2021 are Uniswap, PancakeSwap, 1inch Liquidity Protocol, Raydium, Sushiswap.
If you’re a crypto trader, chances are you’ve had a run-in with top centralized exchanges such as Binance or Coinbase. New to crypto trading? Pretty sure someone’s advised you to use one of these too. Decentralized exchanges however are all the rage these days.
Even though they’re not as widely used at the moment as one would expect, it’s pretty clear that they’ve made an impression. They are here to stay. With the world moving towards decentralization more and more, it’s going to be no surprise when one day all of us turn towards DEXs for mass adoption.
This is also because currently-popular centralized exchanges are remnants of one classic issue with conventional financial systems—they are governed by a central authority. In these cases, this would be a company that controls your funds and data such as within banks.
In fact, the exchange becomes a custodian that holds your assets as a market maker. It finds users willing to sell assets to buyers or vice versa. Functions of a CEX include asset custody, asset listing, liquidity provision, etc. They also have headquarters and director boards.
With decentralized exchanges, entirely peer-to-peer trading can take place. In place of a central authority, software and users govern them. DEXs also refrain from using intrusive and insecure Know-Your-Customer (KYC) surveys like identity verification, addresses, income information, and more.
To specify, decentralized exchanges are automatic, or at least work in a semi-automatic way. Users on the platform have direct involvement in making important decisions. Moreover, this provides the technical possibility of direct interaction between participants. Along with this, it has a distributed ledger for storing and processing all data. At the same time, the platform does not save any personal data as it only exists as a tool to enable trade.
So, without further ado, let’s look at the Top 5 Decentralized exchanges of 2021.
Built on Ethereum, Uniswap is a leading decentralized exchange, providing opportunities for many users. The DEX is designed to function as a public good, a platform for the crypto community to trade tokens on without additional fees or middlemen. It is also unique in how it uses a math equation and pools of tokens to execute trades. With a 24-hour trade volume of $1,241,070,580.19 at news time, it is ranked first on our list of Top 5 Decentralized Exchanges of 2021.
PancakeSwap uses an Automated Market Maker (AMM) structure as a DEX. No order books, bidding systems, or limit/market orders are involved in this structure. Instead of these ways, users trading on the platform obtains liquidity from liquidity pools. After the trade is complete, the liquidity pools rebalance. The rebalancing is done by subtracting liquidity from one side of the pool and adding it to the other. This changes the weights of assets in the pool and their relative values. Its trading volume in the past 24 hours is $967,719,199.26.
3. 1inch Liquidity Protocol
This unique DEX is a next-gen automated market maker (AMM). It protects users from front-running attacks and also offers liquidity providers capital efficiency. Most importantly, it ensures traders can buy and sell ERC-20 tokens without being affected by slippage. The 1inch smart algorithm captures the value that gives liquidity providers competitive returns. At the time of writing, the DEX’s trading volume stands at $569,487,291.59.
Raydium is based on the Solana blockchain, working as an automated market maker (AMM) and liquidity provider. Different from other AMMs where liquidity is exclusive to their own platform, Raydium gives on-chain liquidity to a central limit orderbook of the Serum DEX. Serum is also based on Solana. With Raydium, users can trade using orderbooks or AMM, take part in liquidity mining, or even stake RAY (its native token) to participate in token sales and earn rewards. Currently, its volume over the past day is $390,061,083.
SushiSwap is a software that runs on the Ethereum blockchain. It gives incentives to users who operate its crypto trade platform. Similar to other DEXs, it uses a collection of liquidity pools for the crypto trade. Users first lock-up assets into smart contracts and traders then buy and sell crypto from those pools. Users holding its native token, SUSHI, have the authority to make decisions on the platform. It has a 24-hour trading volume of $374,799,608.61.
So there it is. Coinquora’s list of top 5 decentralized exchanges of 2021. Remember traders, with more control comes more responsibility. Not having a third party in the middle is great, however, users will have to be careful while trading. A DEX will not help with a forgotten password or any data loss that occurs because of a lack of KYC procedures. So keeping that in mind, if you’re up to the challenge, pick a DEX from our list and trade away!