Decentralized Exchanges: The Top 8 DEXs Compared

Nearly everyone in the blockchain space agrees that decentralized exchanges are the future of cryptocurrency trading. That’s because, in today’s industry, trading digital assets is neither secure nor simple.

To start trading, you must first buy assets with a fiat currency (USD, EUR, GBP, AUD, etc.) through fiat gateway services, which often charge high fees and offer terrible exchange rates. Only a few major digital currencies are available. Once you’ve made the purchase, you no longer have control of your own funds- the exchange does.

This system forces centralized exchanges to be responsible for holding and protecting all users’ funds. As a result, exchanges must manage a few centralized wallets that control huge amounts of wealth.

The solution is decentralization. If all trades are fully peer-to-peer, as on a decentralized exchange, then intermediaries will no longer need to hold and manage users’ funds. It makes the industry far more secure. It also promotes adoption by greatly simplifying the trading process.

While many projects are working on various DEX protocols, few of them have developed a DEX that meets all 4 core requirements of a truly decentralized exchange .

This article will examine and compare the protocols of the top decentralized exchanges: 0x, IDEX, Waves, Loopring, Kyber Network, Decred, Nash Exchange, and AtomicDEX. After a thorough analysis, we will be in a position to evaluate the relative merits of each DEX and discover which one has the most to offer its users.

Centralized Exchanges

Before we get to decentralized exchanges, let’s understand the traditional digital asset exchange. An ordinary digital asset exchange is a web application that runs on centralized servers. It is typically not open source. It must manage users’ login data, such as their email addresses and passwords, as well as their KYC documents (if the exchange requires them). We can refer to exchanges of this variety as centralized exchanges (CEX).

To make trades on a CEX, users must deposit funds upfront. It’s clear why this is a requirement, as users should not be allowed to make trades with funds they do not have.

However, the deposit process can take up to an hour or more, as most exchanges require a high number of block confirmations before the funds are considered safely deposited. This model also forces users to forfeit control of their funds when making a deposit to a CEX.

Centralized exchanges use a credit system, sometimes called an IOU system. This means that when a trader deposits funds, her account gets credited accordingly and then she can create buy and sell orders.

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The article was originally published on October 29, 2019.