What are decentralized exchanges?
A decentralized exchange is a peer to peer online service that allows the direct exchange of cryptocurrencies between two participating parties. It therefore enables so-called peer-to-peer, or equal-to-equal, cryptocurrency trading. It is therefore a cryptocurrency exchange that operates in a decentralized manner, that is to say, without any central controlling entity. It also creates peer to peer markets directly on the blockchain. These exchanges are then generally managed and transactions on them are verified in one of two ways. Either it is a completely automated process backed by an algorithm, or in the latter case the controlling entity is the users themselves and the overall participants on the network.
Top DEX exchanges by number coins.
Number of coins +/- 2239 coins, 5930 pairs
PancakeSwap is an online exchange, also the official name of the cryptocurrency CAKE. This currency is based on the Binance Smart Chain project, the blockchain (the heart of cryptocurrencies) from the world’s most famous exchange, Binance.
This exchange is also very popular due to its operation based on AMM (Automated Market Maker), thanks to which the exchange does not take place in front of any intermediary. The relationship is therefore purely between the exchange and you. No so-called middleman or other exchange is involved in the transfer. This is an example of decentralisation.1
2. Uniswap V2/V3
Number of coins +/- 2205 coins, 3838 pairs
Uniswap is a decentralized exchange (DEX) that makes it easy for users to exchange an ERC-20 token for another ERC-20 token without the need for a centralized intermediary.
With DEX, traders do not need to deposit their tokens on the exchange and be exposed to the security risks of a centralized exchange. Users only need an Ethereum wallet, such as Metamask, and can start exchanging tokens immediately.
Users can then exchange tokens directly without the need for an order book. This works through the Automated Market Maker (AMM) tool, where liquidity providers (LPs) store tokens in a smart contract and this liquidity then provides a quote to traders without relying on professional market makers. The liquidity providers are compensated for providing liquidity on the protocol with a trading fee of 0.3%… Translated into language I understand this means that this protocol will make it easier for us to exchange tokens and provide liquidity for which the holder is compensated.
Number of coins +/- 360 coins, 689 pairs
Launched in August 2020 as a fork of the Uniswap decentralized exchange, SushiSwap briefly outperformed its competitor. Now in third place in UniswapV3 and v2, DEX is rolling out a series of integrations with major networks outside of its native Ethereum blockchain to offer users a single entry point and lower fees.
The SushiSwap protocol is one of the biggest proponents of a multi-chain the future in decentralized finance, as DEX is already live on Ethereum, Binance Smart Chain, Polygon, Avalanche and Fantom. Covalent’s data provides an overview of SushiSwap across these five chains.
The data exposes the most popular chain by number of swaps executed daily is Polygon, as usage of the protocol skyrocketed in May.
Number of coins +/- 258coins, 256 pairs
1inch Network, a platform designed to find the best deals on several decentralized exchanges (DEX), has expanded to Polygon, a layer 2 scaling solution for Ethereum.
The push will allow 1-inch users to access multiple Polygons – the underlying liquidity sources that initially will include Curve, SushiSwap, QuickSwap, Aave V2 and Cometh. Additional protocols will be added in due course, the company announced in a press release shared Thursday.
Layer 2 scaling solutions like Polygon facilitate quicker and lower-cost transactions by running parallel sieves or side chains alongside the main Ethereum blockchain. Polygon is getting more popular, with DeFi giants like Aave integrating into the network to avoid Ethereum’s high gas fees – the expense of using its network.
Polygon aims to helpEthereum “keep up with the competitors” as it transitions to the Proof of Stake (PoS) consensus algorithm, 1inch said. Polygon is said to be offering high throughput of around 7,000 transactions per second.