Top 5 Cryptocurrency Decentralized Exchanges
As a result of the insane returns on altcoin investments during the 2017 bull market and the 2020 DeFi boom, an increasing number of people have become interested in cryptocurrency investing in recent years.
Author:James PierceReviewer:Camilo WoodJul 08, 20214K Shares193K Views
- DEXs, or Decentralized Exchanges, are gaining momentum right now.
- New DEXs are entering the market.
- The top 5 cryptocurrency decentralized exchanges are UniSwap, MEDX, SushiSwap, PancakeSwap, and BurgerSwap.
- You can earn money from DEXs but they have a different earning system compared to investing in crypto directly.
As a result of the insane returns on altcoin investments during the 2017 bull market and the 2020 DeFi boom, an increasing number of people have become interested in cryptocurrency investing in recent years. As a consequence, we've seen the rise of creative exchange sites that claim to be one-stop shops for all of your crypto trading needs.
However, centralized exchanges pose major threats to customers, with billions of dollars of mostly Bitcoin and Ethereum lost per year in complex hacking and fraud, drawing the wrath of regulators that are now increasingly controlling it, compromising consumer privacy. Decentralized exchanges have increased in prominence in recent years to solve these problems.
To know more about cryptocurrency decentralized exchanges, we summarized the essential things you need to know about DEXs here and what are the top five exchanges today.
What Are Decentralized Exchanges?
DEXs, or decentralized exchanges, are self-contained decentralized applications that enable cryptocurrency buyers and sellers to transact without handing over ownership of their funds to a third party.
Users fork over their cryptocurrencies to the exchange, which functions as a custodian and gives IOUs for users to transact with on the website.
DEXs are designed to do away with the need for some central authority to oversee and sanction trades within a given exchange. DEXs run automatic order books (also known as automated market makers) and exchanges with the aid of smart contracts. As a result, they're considered "true peer-to-peer."
How Do DEXs Work?
A decentralized market communicates and displays bid/ask values in real time using a variety of automated devices. Buyers, vendors, and brokers may not be in the same position to exchange securities in this manner.
There are several groups of DEXs, which can be classified into the following categories:
Automated Market Makers Or AMM
Automated market makers, who are used by prominent DEX sites including Uniswap, SushiSwap, and Kyber Network, erupted in prominence in 2020, leading most of the DeFi boom. Order books are unnecessary for AMMs. Instead, they use smart contracts to create liquidity pools that conduct trades automatically based on preset parameters.
On-Chain Order Books
There are network nodes allocated to manage the log of all orders in a DEX that utilizes on-chain order books. It also necessitates the use of miners to verify each transaction.
The StellarTerm and Bitshares markets are two well-known websites that utilize on-chain order books.
Off-Chain Order Books
Off-chain order books, unlike on-chain order books, keep track of purchases through a centralized body. To administer these order books, they use "relayers." Off-chain order book DEXs, unlike other forms of DEXs, are still quasi-decentralized in this regard.
Binance DEX, 0x, and EtherDelta are examples of DEXs that use off-chain order books.
Top 5 Cryptocurrency Decentralized Exchanges
Uniswap (V2)
On the Ethereum blockchain, Uniswap, an on-chain liquidity protocol, allows trustless token swaps by executing all transactions via smart contracts without the requirement for a broker or trusted group. ERC20 token holders have found this decentralized method of exchanging tokens to be a common way to trade their tokens and offer liquidity to coin pairs.
Uniswap should be on your horizon if you're involved in keeping and/or exchanging cryptocurrency, Ethereum growth, fin-tech, or financial developments in general. To correlate with the boom of the DeFi vacuum, it experienced some fast growth in the third quarter of 2020. Uniswap may be used as a stand-alone utility or built into third-party wallets or Dapps. Uniswap is also used by other smart contracts as a basis for their services.
How does it work?
Each pair of tokens has its own pool, which is created using the Factory contract, and into which initial transactions are made to provide liquidity. The constant commodity method is used to measure the token's exchange rate, which is dependent on the supply and demand in the collection.
How to create an account?
https://app.uniswap.org or https://uniswap.exchange is the most widely used protocols for Uniswap. The following are the steps to creating an account.
- Navigate to the Uniswap user gui.
- Connect your wallet to your computer. You may use MetaMask, Trust Wallet, or some other Ethereum wallet that is sponsored.
- Choose the token you'd like to share from the drop-down menu.
- Choose the token you'd like to convert to.
- Select Swap from the drop-down menu.
- In the pop-up display, you will see a preview of the transaction.
- In your pocket, confirm the transaction order.
- Wait for the Ethereum network to validate the transaction. You will keep track of its progress at https://etherscan.io/.
How to make money on Uniswap
On Uniswap, you will make moneyby supplying liquidity in the form of ETH and DAI. These assets are used by Uniswap to provide liquidity to traders. In exchange, it splits the trade commissions for you.
Users will trade tokens and ETH against one pool of assets stored in a smart contract with Uniswap. On Uniswap, there are no order books that determine the exchange rate. Rather, the rate is determined by the amount of ether and tokens in each pool. Each pool's depth decides how much trade it can accommodate. The larger the trade, the deeper the pool.
Here's where it gets tricky. When the percent difference between the properties changes, you lose money—the change may be in any way, up or down, it doesn't matter. Any shift in the market ratio from when the reserves are added to the pool and when they are withdrawn leads to an impermanent loss:
- If the price changes by 1.25x, the loss is 6%.
- If it’s 1.50x, the loss is 2%.
- If it’s 3x, the loss is 13.4%.
- If it’s 5x, the loss is 25.5%.
It's considered impermanent when the deficit isn't known until the percentage recovers to where it was before the investments were first applied. The trading fees minus the temporary or impermanent loss as you quit are the net profits.
MDEX
MDEX is a decentralized exchange focused on Huobi Eco-Chain (HECO) and Ethereum that facilitates "dual mining" of liquidity and trade mining.
It has recently grown to include Binance Smart Chain. You can think of it as a substitute for PancakeSwap.
MDEX now embraces BSC, HECO, and ETH's decentralized cross-chain transaction protocol. Its aim is to combine the benefits of a number of simple public chains to develop a massive compound DEX ecosystem.
How does it work?
MDEX operates similarly to Uniswap in that it allows you to exchange every pair of assets through its pools and automated market-making mechanism for a 0.3 percent charge. It's also close to Sushiswap in that it offers incentives in its marketplace token MDX to entice buyers and traders.
How to create an account?
To create an account with MDEX:
- Set up your HECO wallet in advance, for example, MetaMask (download website: MetaMask). https://metamask.io/(https://metamask.io/)
- Select ‘Settings' ‘Networks' from the metamask by clicking on it. Add ‘Network' and configure it using the parameters below. After that, press the ‘save' button.
Parameters：
- Network Name: HEC-Main
- New RPC URL: https://http-mainnet.hecochain.com
- Chain ID：128
- Currency Symbol (optional): HT
- Block Explorer URL (optional): https://scan.hecochain.com
MDEX's on-chain success has been incredible since its arrival on Binance Smart Chain.
How to make money on MDEX
There are two ways to earn from MDEX: through its reward pool and transaction mining.
The Boardroom incentive pool on the MDEX website would use 0.14 percent of the 0.3 percent processing fee as incentives, which will be distributed through the Boardroom reward pool. The incentive includes transaction pairs, as well as two kinds of reward tokens: MDX and HT. The total payout is 35 million USDT.
On the one hand, users who engage in transactions on MDEX will earn MDEX governance token MDX as a reward. USDT/HFIL, SNX/USDT, AAVE/USDT, USDT/HBCH, and HDOT/USDT are high-output transaction pairs, with an APY of over 600 percent. It involves a significant range of DeFi ecological ventures, like AAVE and SNX, in addition to conventional holdings.
Sushiswap
SushiSwap is an Ethereum-based program that aims to entice a user base to run a website where they can buy and sell cryptocurrency properties.
SushiSwap, like Uniswap, achieves this aim by using a series of liquidity pools. Traders purchase and sell coins from such pools, trading out one cryptocurrency for another, once users lock up money in smart contracts.
How does it work?
SushiSwap's main purpose is to simulate a standard market by allowing users to buy and sell various crypto properties.
Tokens exchanged on SushiSwap are regulated through smart contracts, rather than by a single central authority, and users secure crypto on the software, which can then be controlled by traders.
Those that sell against locked securities must incur a premium, which is then proportionally allocated to all liquidity suppliers depending on their exposure to the pool.
How to create an account?
To create an account with SushiSwap, follow the steps below:
- Go to https://sushi.com/to visit SushiSwap's homepage.
- To use this platform, go to "Unlock Wallet" or "See The Menu." In any case, you'll need to add your Ethereum wallet.
- Sushi Swap supports MetaMask, WalletConnect, and a variety of other non-custodial wallets. Choose the one that appeals to you the most.
- Give Meta Mask or Wallet Link permission to link to Sushi Swap. You can now add your tokens to the liquidity pool until you've connected.
- Various liquidity pools are introduced to you (LPs). The annual percentage yield varies by liquidity pool (APY).
How to make money on SushiSwap
Earning on SushiSwap is just like earning on Uniswap and MDEX.
Sushi Swap's native token is SUSHI. Sushi tokens are earned as you donate to the liquidity pool. SUSHI may be exchanged for ETH.
0.25 percent goes to successful liquidity suppliers, while the other 0.05 percent is translated back to SUSHI and provided to sushi investors.
PancakeSwap
PancakeSwap is a decentralized exchange powered by Binance Smart Chain, a quick and low-cost Ethereum alternative.
PancakeSwap, like the well-known Uniswap DeFi AMM protocol for Ethereum, allows users to exchange cryptocurrency assets by leveraging them into user liquidity pools.
PancakeSwap provides a variety of DeFi farming incentives for liquidity suppliers to build said liquidity pools. Following the launch of PancakeSwap, more than $1 billion in total valuation locked (TVL) was transferred to the platform.
PancakeSwap, unlike Uniswap, rewards users who stake the native BEP-20 token, CAKE. a 1:1 scale, you get SYRUP when you steak CAKE. SYRUP investors are entitled to 25% of the CAKE pollutants, which are allocated proportionally to holders.
How does it work?
An automated market maker (AMM) platform is used by PancakeSwap. If you can share digital assets on the website, there isn't an order book where you'll be paired with someone else. You trade against a liquidity pool instead.
Those pools are stocked with money from other customers. They put them into the pool in exchange for liquidity provider (or LP) tokens. They will redeem their cut, as well as a part of the trade costs, from certain tokens.
How to create an account
You'll need to know how to link Metamask to Binance Smart Chain before diving into PancakeSwap. Before you start using PancakeSwap, here's a quick tutorial to help you get started.
- To use the decentralized PancakeSwap exchange, go to Pancakeswap.finance and choose Trade from the menu.
- After that, you'll be presented with two choices: Exchange and Liquidity. Toggle the tool in the middle of your computer to the Swap choice by clicking Exchange.
- You can also choose the exchange's inputs. From the drop-down menus in each section, select the crypto you want to swap. When you exchange cryptocurrencies on PancakeSwap, you're trading against user-generated AMM liquidity pools rather than an order book.
- In comparison to a centralized exchange, this allows swaps to be simple, fast, and scalable since anybody can generate a pair, create liquidity for it, and thereby open up a new marketplace for the DEX.
- After you've chosen your assets, click the Swap icon, check the transfer in your pocket, and you're finished!
How to make money on PancakeSwap
PancakeSwap, like Uniswap, allows you to become a liquidity supplier and earn incentives. It's easy to do so, and it leaves the AMM liquid for customers of the exchange.
SUSHI token holders who stake their tokens get xSUSHI, an income token that helps the protocol collect transaction fees. CAKE token holders who hold their tokens get SYRUP, which entitles them to CAKE prizes.
CAKE Tokens can be obtained in a variety of forms on Pancake Swap. Both providing liquidity and staking FLIP tokens or CAKE tokens are options.
Providing liquidity
To begin providing tokens to the PancakeSwap website, tap Liquidity. Tap Add Liquidity to proceed. Select the tokens you wish to deposit and then approve them. When you enter the number of tokens, the system will determine the sum you'll need to provide.
Once the token has been issued, you will receive a confirmation. You can get Liquidity Provider (LP) tokens in return for a portion of the fees earned by the Pancake Swap exchange. FLIP tokens are another name for LP tokens.
FLIP tokens
You will stake your FLIP tokens to increase your incentives. To access the Home Menu, tap the three lines in the upper left corner. After that, tap Farms to open the PancakeSwap "Kitchen" and pick the LP tokens you've given. Choose from the CAKE-BNB LP Farm or the CAKE-BNB LP Farm.
Stake CAKE
If you do not want to supply your CAKE tokens to the platform, you should stake them. Additional tokens will be produced by staking CAKE tokens in individual staking pools. We'll stake CAKE in this guide to win more CAKE.
Your CAKE tokens will be staked, and as a result, you will receive more CAKE tokens. At any point, you will harvest your CAKE and stake it repeatedly to earn more tokens.
BurgerSwap
BurgerSwap is a decentralized exchange protocol based on Binance Smart Chain (BSC). BurgerSwap is a decentralized exchange (DEX) that uses an automated market maker (AMM) model to operate. It helps users to receive tokens by offering liquidity, close to PancakeSwap and other protocols.
How does it work?
BurgerSwap enables you to trade amongst BSC tokens and win incentives for bringing liquidity to decentralized markets.
BurgerSwap, unlike other related DeFi ventures like Uniswap and SushiSwap, does not use the standard Liquidity Provider (LP) tokens. Instead, anyone who contributes liquidity to qualifying pairs is compensated with BURGER tokens, which reflect their portion of the pot.
How to create an account
You must first attach your MetaMask wallet to the Binance Smart Chain before adding it to BurgerSwap. Connecting MetaMask to Binance Smart Chain is a good place to start if you don't know-how.
So, before you can use BurgerSwap, it’s essential that you have a Binance account so you can start from there.
- Go to the BurgerSwap website (https://burgerswap.org) next.
- To attach your wallet, click the "Connect Wallet" icon. Make sure you're on the Binance Smart Chain instead of the Mainnet Ethereum network.
- You'll be able to see and browse through the BurgerSwap items after adding your wallet (Swap, Pool, Governance, Bridge, etc.).
How to make money on BurgerSwap
There are three ways to make money on BurgerSwap: staking $BURGER in governance and voting to earn rewards, providing liquidity, and staking $BURGER outside the platform.
Staking $BURGER in governance and voting to earn rewards
The government pool would award each vote with $BURGER mining incentives.
These benefits would be distributed proportionally to all consumers who stake $BURGER and vote. Please keep in mind that there is a limited staking cycle that is governed by society as well.
Providing liquidity
You can get mining incentives from the $BURGER liquidity mining pool as well as a portion of processing fees on the same pair if you have liquidity. Only LPs on $BURGER pairs are qualified for mining incentives. For both sets, the processing fees are allocated to the LPs.
Staking $BURGER outside the platform
The $BURGER farm was recently launched on fry.world. You will stake $BURGER and receive $FRIES in exchange for securing the $BURGER.You will remove your $BURGER at a certain moment and there is no lockup duration.
James Pierce
Author
Camilo Wood
Reviewer
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