In trades conducted through DEX, the typical 3rd parties’ entities, which would normally oversee the safety and transfer of assets e.g., banks, stockbrokers, online payment gateways, government institutions, etc., are substituted by a blockchain or distributed ledger. Smart contracts and order book relaying are two major means of operation, although there are many other possibilities with varying degrees of decentralization.
DEX lessens the danger of theft from exchange hacking because traders do not need to send their assets to the exchange before executing a trade, but liquidity providers do need to transfer tokens to the DEX.
Uniswap
Hayden Adams, a former Siemens mechanical engineer, founded Uniswap in November 2018. It’s an Ethereum protocol for exchanging ERC20 tokens. It is intended to serve as a public good, allowing members of the community to exchange tokens without paying platform fees or dealing with middlemen.
To compute pricing and perform trades, it uses a basic math equation and pools of tokens and ETH. It utilizes a pricing mechanism called the “Constant Product Market Maker Model.” Any token can be added to Uniswap by financing it with an amount equivalent to ETH and the ERC20 token being traded.
dYdX
Antonio Juliano, a former Coinbase engineer, launched dYdX in 2017. The majority of its crypto margin trading products are based on the Ethereum blockchain. However, the exchange recently launched Layer 2 for low-cost, instantaneously finalized trades.
Its exchange platform’s early versions provided traders with minimal crypto margin trading features with restricted assets. It has now stepped up its game by introducing margin and perpetuals for a variety of cryptocurrencies. In order to decentralize the entire trading process, it also provides loan and borrowing services. The exchange combines the speed and usefulness of a centralized exchange with the security and transparency of a decentralized one.
Serum DEX
The project was created by Serum Foundation, a consortium of partners including FTX, Alameda Research, and the Solana Foundation in 2020. It’s a DEX ecosystem based on the Solana blockchain. It has among the lowest trading costs and fastest transaction speed in the cryptocurrency business. It prioritizes decentralization, avoiding the usage of oracles to pricing feeds, a service that many DeFi protocols rely on. It’s really quick, inexpensive, and simple to use.
It enables cross-chain trading, which allows users to trade assets from many blockchains. Additionally, it accepts wrapped currencies and stable coins. It also allows customers to construct their own customized financial solutions. Serum uses decentralized automatic limit order books rather than the standard automated market maker model.
PancakeSwap
It was launched by unknown developers in September 2020. It’s a DEX based on Binance Smart Chain, one of Ethereum’s main competitors. PancakeSwap has grown to become the network’s largest automated market maker (AMM) as of 2021.
Users receive rewards in the form of the platform’s native CAKE token in return for staking tokens in protocol liquidity pools. Traders can also increase their CAKE payouts by investing in single-asset PancakeSwap Syrup Pools. The platform has recently launched a non-fungible token (NFT) marketplace, prediction market, lottery system, and Initial Farm Offering (IFO) functionality.
Kine Protocol
It is live on Ethereum, Polygon, Binance Smart Chain, and Avalanche platforms. Because it is a decentralized system, users can use a Web3 wallet like MetaMask to access the platform and choose which chain they want to utilize.
Kine creates general-purpose liquidity pools that are backed by a digital asset portfolio. The liquidity pool allows traders to open and exit derivatives bets based on trustworthy price feeds, removing the need for third-party counterparties.
Kine overcomes the limitations that many existing peer-to-pool or peer-to-contract trading protocols have by extending the collateral base to any Ethereum-based assets and allowing third-party liquidation. It’s essentially a decentralized exchange for derivatives trading, with on-chain staking, no slippage, and no gas fees.
Apollo DEX
It was launched by the Apollo foundation in 2021. The exchange is built with the goal of being one of the first genuinely immutable. The software creates and executes orders with extra conditions and regulations using Ethereum smart contracts. For safe and controlled interaction with the Ethereum network, Apollo DEX’s own Ethereum nodes have been deployed. This allows the system to interface with the Ethereum blockchain without the use of third-party services.
Apollo DEX is one of the safest exchanges on Earth, thanks to features like the ability to transfer from cold storage to cold storage. Trades take place on the blockchain without intervention, thanks to Apollo’s exclusive atomic swap technology. TradingView’s graph and features will also be available in the Apollo web wallet’s exchange section. Therefore, a trader can quickly assess the market and carry out transactions.
Trader Joe
Trader Joe, founded in June 2021 by 0xMurloc and Cryptofish, expanded swiftly and offered a wide range of services. It is an AMM DEX platform on the Avalanche blockchain. In addition to being an AMM, it incorporates a lot of features such as yield farming, lending, staking, and others in order to become an aggregate platform and provide customers with the greatest experience possible.
Users can also trade tokens for $LP tokens with only one click using the Zap tool, which is a new feature on AMM. It also offers a farm where you can invest your liquidity pool tokens to gain an additional return. Extra yield is rewarded in $JOE Tokens and bonus token rewards.
Uniswap (V2)
Here’s the second version of Uniswap, which comes with several new features and enhancements. Any ERC20 token can be pooled with another ERC20 token directly. The core contracts use Wrapped Ether (WETH), but end users can still use ETH using helper contracts.
The ERC20 token/ERC20 token pools in Uniswap V2 may be useful for liquidity providers who want to diversify their ERC20 token positions without having to expose themselves to ETH. A DAI/USDC pair is an example of a pair that should have minimum volatility for liquidity providers but is helpful for trade.
Having direct ERC20/ ERC20 pairs can also improve price increases because routing through ETH for a swap between two other assets involves paying fees and slippage on two separate pairs instead of one.
Conclusion
Decentralized exchanges have gained a lot of traction. The two key modes of functioning of DEX are smart contracts and order book relaying. The best DEX crypto to invest in include Uniswap, dYdX, SerumDEX, PancakeSwap, Kine Protocol, ApolloX DEX, TraderJoe, and Uniswap V2.
