Efficient Frontier
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Efficient Frontier

Part 2: In Search of a Completely Decentralized Cryptocurrency Exchange

In the previous post, back in October, we defined decentralization and went over the three important technological aspects of cryptocurrency exchanges (custody, infrastructure and order matching), explaining what decentralizing exchanges can entail.

For this post we’ve researched the current state of what are commonly titled “decentralized exchanges” or DEX’s. We’re going to show that according to our criteria, the “state of the DEX” is today really semi-decentralized.

From the lists here and elsewhere we found 15 decentralized and semi-decentralized exchanges that are live and operational. The table below details the type of custody, order matching, asset range and hosting and access infrastructure as they pertain to decentralization. Combining this information shows the exchange’s extent of technological decentralization.

We marked in green technological aspects that are generally decentralized and resilient. We collected the information from online sources without reviewing the source code and included in the list exchanges that have decentralized more than one of their technological aspects. This space is growing and changing at a fast pace, so please comment with any discrepancies or exchanges we’ve missed. If you are new to cryptocurrencies we recommend reading the previous post first.

Comparison of Semi-decentralized Crypocurrency Exchanges

Explaining the table:

Custody solution: All the exchanges in the table are non-custodial and use transparent and proven methods to swap assets between users in a way that prevents, or greatly minimizes the risk of one of trading the parties, or a third party stealing the funds.

As discussed in the previous post, there are a variety of high quality smart blockchain based non-custodial trading solutions:

1) Multi-Signature contracts are combined with an escrow service to trade between most crypto-assets and are native to Bitcoin and many other coins. Multi-Signature (Multisig) is a simple and safe way to trustlessly swap a very wide range of crypto-assets, but in some disputed cases the users must defer to a human arbitrator or the funds may be frozen.

2) Atomic-Swaps are fast on-blockchain script controlled asset swaps that can be created between any blockchain or coin that has the relevant scripting language. According to BarterDEX this includes 95% of crypto assets, including many major cryptocurrency, such as Bitcoin, Ethereum and Litecoin. In comparison to Multisig it has the advantage of alleviating the need for an escrow setup but, on the other hand, can not be used when trading crypocurrecies for government issued currencies.

3) Smart Contracts. When the term “Smart Contract” is used without specifics it may describe any program that is executed through a cryptocurrency blockchain (Multisig and Atomic-Swaps are also considered smart contracts). “Smart Contract” without specifics usually describes a custom written program that works only on its native blockchain. In the case of Ethereum, anyone can write a program and upload it to the Ethereum network for a specific purpose. In other projects, such as Wave and Bitshares, the programs/smart-contracts were written by the project’s main developers and are default features of these networks.

Order matching

Order matching, as we explained in the previous post, can be thought of as the heart of the exchange. It can include the creation and maintenance of an order book, or other methods which determine which asset is swapped with which and for what price. Order matching is the most complicated and undeveloped aspect of decentralized exchanges.

Exchanges using “off-chain” centrally maintained order matching, trade resilience for speed and are definitely categorized as semi-decentralized exchanges. On the other side of the spectrum there are exchanges which avoid this problem by making all trading manual, thereby conserving decentralization while sacrificing speed, liquidity and convenience.

One of the more challenging solutions is creating on-chain order books and other on-chain methods for fair order matching. One of the down sides of this method is the low speed associated with blockchains. In our opinion, there has not yet been found the optimal method to decentralized order-matching. Whoever solves this challenge will very likely become a dominant player in this potentially lucrative space.

Asset Range

As pertains to decentralization, the downside to many exchanges based on Smart Contracts as described above is that they allow trading only assets that are native to the network on which the smart contracts are live. In DEXs based on these smart contracts the assets traded are limited to the range of the home blockchain (e.g., Ethereum tokens or Bitshare assets) and do not have access to the total crypto-asset market (excluding of course synthetic products the deserve a blog post of their own). In contrast, Multisig or Atomic-Swap are well defined and facilitate non-custodial trading over a much wider range of assets and coins.

Networks are complex creatures

Hosting and access infrastructure

How is the exchange accessed and where is it hosted?
This seems to be the weak spot of today’s semi-decentralized exchange space. The large majority of exchanges we checked opt for “old-school” web hosting with the same centralized control and failure points as the regular centralized crypto-asset exchanges. In practice, many web-hosted exchanges are operated on a centralized basis with new asset listings needing authorization of the site administrator who has the ability to block users at will. However, in many cases the website exists alongside access to an open blockchain API which allows the technically savvy to use the exchange directly, even when the site is down.

For most general smart-contract based apps, it’s impossible to know if there is a centrally controlled feature to the contract or if it is truly an indestructible and unchangeable contract without reading the code. Contracts such as Ethereum smart contracts can be created with central control features, so it not always clear how much direct control the exchange maintainers have over the features of the blockchain API without going through each contract.

To date the only solution with a graphic interface is writing open-source downloadable apps which communicate throught a p2p (peer-to-peer) network. This approach if done correctly prevents a central points of failure and down time, as well as unexpected changes to the interface and to the smart contract — avoiding the complications described in the previous paragraph. Only a few live exchanges use this solution today.

We did not list exchanges with under $100 volume a month, or exchanges in their initial phases who have verified that while in public Beta, their contracts are still being centrally modified.

This year, new projects such as Ox and Kyber were created on the programmable Ethereum platform. These projects entail smart-contracts that create a foundation for asset swapping and liquidity without providing a user interface or order books. These projects were not listed separately as they are infrastructure only projects which must have exchanges (and other apps) built upon them.

Other exchanges such as Changelly and ShapeShift are not included as they are only non-custodial and do not claim to be decentralized even though they are sometimes included in DEX lists.

Due to the short time decentralized cryptocurrency exchanges have been in development, no project can yet claim to be on the high level of decentralization and resilience that Bitcoin and Torrent have achieved. Even exchanges with the most robust decentralized infrastructure still rely on one or two programmers who build and maintain the project. In addition, some great projects use escrow services that are currently or permanently operated by a central entity.

Bisq-Network’s loading screen. Bisq ranked the highest in our survey even though its dispute resolution service is still centralized, a feature they promise to remove in coming versions.


Most semi-decentralized exchanges today do the very useful task of decentralizing the custody of the funds by being completely non custodial, while all other aspects of these futuristic exchanges are still under centralized technical maintenance and supervision. This is only the beginning — the world of decentralized and semi-decentralized exchanges is in its infancy and promises to keep being interesting and innovative in the future.

Of the exchanges in the above chart only Bisq Network and BarterDex have not only achieved implementing non-custodial trading solutions, but also allow trading across most crypto-assets (and even government issued currencies) without concern for central server failure, capture or IP blocking. Granted, average users today do not need this kind of resilience, but it is critically important for those who find themselves in exceptional circumstances. For these users the challenging interface is an acceptable trade-off for the ability to take part in the now truly borderless cryptocurrency market.




With over 12 years of high frequency and algorithmic trading experience, our technology powers weekly over $1 Billion of trade. We’re passionate about digital assets and our mission is to bring professional, trusted technology that adds value to the industry and the markets.

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Sarah Wiesner

Sarah Wiesner

@efrontier_io, @bitcoinembassy

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