Cryptocurrency exchanges were created almost immediately after the appearance of the first bitcoins. Since then, they have changed a lot, their functions are no longer limited to buying and selling digital coins for fiat and exchanging one cryptocurrency for another.
Types of cryptocurrency exchanges
Cryptocurrency exchanges form two large groups: centralized (CEX) and decentralized (DEX). The main feature of centralized platforms is that customer funds are stored directly on the platform itself. This will determine their pros and cons.
Of the most obvious advantages are reliability, speed of transactions, legal security and the availability of a support service. Of the minuses: your money formally and technically belongs to the exchange, which means it can be stolen or blocked. In addition, all transactions are completely transparent to the fiscal authorities.
However, it is still difficult to do without CEX. It is easiest and safest to exchange fiat money for digital money on centralized platforms. In addition, it is easy to exchange coins from different blockchains on CEX, for example, BNB to BTC.
DEXs do not store customer funds, exchange operations are performed by smart contracts. It is for this reason that fiat exchange operations are impossible, and cross-chain exchange is very difficult. A deposit is not required for trading, transactions are made from a wallet connected to the platform. The platform compensates for the inability to operate with clients’ funds at the expense of commissions. They are on average higher than at CEX.
Cons of decentralized exchanges:
- There is no technical support, so DEX is the choice for advanced users.
- If you lose your password and seed phrase, it is impossible to restore access.
- Not always a simple interface.
- Crypto-fiat transactions are not supported.
- Limited opportunities for cross-chain swaps.
Pros of decentralized exchanges:
- Trade automation eliminates the influence of the human factor.
- Tokens are stored by the user.
- You can trade anonymously.
Best Decentralized exchanges
Decentralized trading platforms are just starting to make themselves known and it is quite difficult to evaluate them.
Uniswap is by far the leader in terms of trading volume, with more than 45% of the total trading volume on DEXs going through that platform. The platform runs on the Ethereum blockchain and uses an automated market maker model instead of an order book. On Uniswap, you can exchange ETH and any ERC-20 standard tokens, the platform also supports DAI, USDC, USDT stablecoins. Bitcoin is technically incompatible with smart contracts, so a tokenized version of Wrapped BTC (WBTC) is used for operations with it.
The exchange protocol is open to users from all over the world, but the platform interface is not available in several countries.
DEX exchange, more like centralized platforms. All transactions are controlled by smart contracts, but money is not exchanged directly from wallet to wallet, but goes through a deposit, like on CEX. The platform is focused on derivatives trading.
Initially, the platform was launched on the basis of the Ethereum blockchain, however, bandwidth problems prompted the team to look for their own solution. For V4, it is planned to launch an independent blockchain.
The functionality of the platform is not available from countries against which there are sanctions.
Trading with leverage is available on the exchange.
Pancake Swap V2
PancakeSwap is part of the Binance ecosystem and supports BEP-20 token swaps. The platform uses an automatic market maker mechanism. Liquidity providers can earn LP tokens, which entitle them to a share of the platform’s trading fees, as well as farming. Prize drawings are held on the platform, and an NFT marketplace operates.
The protocol is available in all countries of the world, however, the exchange is not available from some regions.
An exchange for trading derivative financial instruments based on cryptocurrencies. This is a cross-platform platform – it works with both ETH and BNB networks. The exchange offers an infinite liquidity pool and trading leverage. There is no data on geographic access restrictions.
Curve Finance is a decentralized stablecoin exchange pool. It operates using the AMM model, which guarantees traders maximum efficiency with minimal slippage. The ability to provide liquidity to liquidity pools is available to anyone.
The protocol is available on several blockchains, in particular, Ethereum, Avalanche, Fantom, Polygon, and Harmony. A bridge is used to transfer tokens between blockchains.
There is no data on geographic restrictions, but it is technically possible to geo-block users from sanctioned regions.