Binance, Gemini, Kraken, Coinbase, FTX, Crypto.com, and OKX are all names that are no longer only known to crypto enthusiasts but the general public too. However, there have been new players in the ecosystem that are fighting to take their place: Decentralized Exchanges (DEXs).
Ever since Bitcoin was first proposed by Satoshi Nakamoto, the Crypto ecosystem has grown to become one of the biggest financial instruments in the world. This success has created a number of profitable businesses around cryptocurrencies, with Centralized Exchanges (CEXs) being the leaders.
While these platforms play an important role in the functioning of the crypto space, they lack when it comes to decentralization.
Centralized exchanges are run by for-profit corporations that operate as an authority and intermediary between all parties. In addition to these, most of them make use of a custodial model that adds points of failure to the trading, storing, and investing process.
With the inception of Decentralized Finance (DeFi), DEX took the opportunity to provide crypto investors with a decentralized alternative. Platforms like Uniswap, Serum DEX, PancakeSwap, and MDEX allow players to trade crypto in exchange for a fee that allows them to operate.
However, unlike with CEXs, CEX platforms use fees to reward users who provide liquidity and to store them for other uses, instead of profiting from a central authority. This allows the community to sustain the platform, which they usually get to govern via voting through governance tokens.
Over time, CEXs has grown to offer more than just trading services, expanding their portfolio of services to include staking, farming, lotteries, NFT trading, Initial DEX Offerings, and much more.
This has allowed the DEX ecosystem to grow at a fast rate over the past years, getting to the point in which CEXs have included their own decentralized services in an attempt to compete.
Crypto investors who use DEXs benefit from an increased variety of tokens to trade, more security, total anonymity as no KYC is required, non-custodial nature, decentralized governance, and lower fees. However, DEXs don’t offer the option to trade between crypto and fiat, which in addition to being harder to use, make them inaccessible to most new traders.
While DEXs are still in their early stages of development, they have gained popularity in the crypto world. The benefits they provide and the rapid growth of the space will ensure they continue to grow over the next year, opening a new world of possibilities to crypto users.
