Decentralized exchanges (DEX) are free from the authority of governments, central banks, regulators, and any singular entities altogether–public or private. They’re run on networks of peers spread around the globe, rather than servers or centrally-controlled hosting, and are therefore safer than any centralized exchange out there.
In addition to having single points of weakness for hacks and other manipulative breaches (many still feel the sting of Mt. Gox), centralized exchanges must also control the private keys of their users, meaning that any cryptocurrency you hold on a centralized exchange isn’t truly yours.
While decentralized exchanges are superior in terms of custody over your money, there is a learning curve, and they generally all suffer the same downsides: slowness, low volume, and low liquidity. This is alright for investors who plan on buying and holding, those who trade on longer time frames, or people who want exposure to very small market cap coins.
These elements often increase volatility on DEXs as well, so caution is advised. Still, there are many great decentralized exchanges that are maturing rapidly, thanks to large support from the cryptocurrency community and growing interest in this “pure” way to trade.
1. Waves Decentralized Exchange
Waves DEX is a completely trustless exchange built on Waves’ blockchain, which allows users to trade their Bitcoin, WAVES, and other large-cap cryptocurrencies for any of the tokens on the Waves platform.
While the exchange itself and all its wallet-related operations are decentralized, it does incorporate centralized services, but just ones that can be “outsourced” safely without risking user funds or the network itself. The order matching list, for example, is centralized externally, and this makes Waves a very fast exchange relative to other DEXs.
In terms of security, Waves is a top contender, but its use of encryption for the order matcher isn’t as safe as it would be if decentralized. As it works on most DEXs, traders don’t have to conform to preset pairs and can trade any currency against any other—and this includes fiat money like dollars, euros and lira.
There are over 70 listed coins on the Waves blockchain, which is an impressive selection, but over half of them have no volume at all. The highest volume coin is logically the exchange’s own WAVES coin, which is used to pay the low fixed trading fee of 0.003 WAVES. Daily volume at the time of writing is just over $5.6 million.
Listed Coins: 3/5
2. IDEX Decentralized Exchange
IDEX is a very popular decentralized cryptocurrency exchange among Ethereum enthusiasts, due to its dedication to ERC20 token trading. There are tokens from over 200 different companies that have launched on the Ethereum blockchain available via IDEX, and though it doesn’t have the highest volume (at around $2.7 million daily), it does boast some much-appreciated features that other decentralized exchanges don’t have.
One of them is market orders—a simple Buy/Sell tool that makes P2P pair trading simpler for uninitiated users. An instant order book is also nice to see, as is the ability to cancel orders without wasting gas. Obviously, as an ERC20 token exchange, the main counter currency is ETH exclusively.
Like its close contender Waves, IDEX also borrows some functionality from peripheral, centralized sources, making it faster than purely-decentralized exchanges. However, it’s safe where it counts most, and has an easy signup process whereby users are guided to create and save their private wallet phrase.
The interface is also one of the more streamlined and well-designed that we’ve seen. Fees are higher on average than with other decentralized exchanges, being reliant entirely on Ethereum’s high transaction volume, so the exchange has instituted minimum orders until their off-chain protocol Snowglobe has finished development.
Listed Coins: 4/5
3. Bancor Decentralized Exchange
Bancor was one of the biggest ICOs of 2017, and raised over $150 million in just 3 hours, kicking the ICO craze into high gear. It has used a portion of those crowdfunded millions to build an excellent decentralized exchange of the same name, offering 55 tokens that are traded against their own, BNT.
Users can even buy cryptocurrency on Bancor with their credit card. Being an ERC20-launched token itself, BNT is buyable with ETH, making the exchange’s listings a bit more accessible. Unlike other decentralized exchanges, Bancor is not a peer-to-peer system and instead allows members to instantly exchange any supported cryptocurrency for any other, in any amount.
This is possible because the system doesn’t match peers with one another. Instead, individuals are trading with the Bancor Foundation’s wallet, which holds billions in cryptocurrency of all varieties. The exchange balances the weight of its various wallets based on real-time demand.
These features make it the fastest decentralized exchange around, and it has no liquidity issues either. In fact, many exchanges borrow liquidity from the exchange to fill their own deficits. Bancor’s wallet is decentralized, safe, and can easily import any other wallet compatible with Ethereum.
We appreciated that the exchange has a built-in forum, so that users can discuss the markets with one another and get help from Bancor representatives. In terms of fees, traders will be happy to know that there are no fees except the gas costs associated with transaction on the Ethereum blockchain.
Listed Coins: 3.5/5