Crypto Exchanges Are Evolving, Are You?
The Main Considerations When Migrating to and Choosing a DEX
As crypto enters the mainstream, the ways in which one can begin investing and trading have multiplied. The most common way to date has been using a centralized exchange (CEX) like Binance, Kraken, or CoinBase. Recently, however, decentralized exchanges (DEX) have grown rapidly in popularity. This post will provide insights into the changing exchange landscape and some key considerations to take into account when choosing an exchange. First, we’ll run through the reasons someone might choose a DEX over a CEX, and highlight some criteria to help you decide which DEX to use. We’ll then explain some exciting new developments in the DEX space and how they can impact the way you trade your crypto.
Let’s begin by reviewing the main differences between centralized and decentralized exchanges, as well as the reasons why someone would consider migrating. A centralized exchange manages security policies, exchange data, and validation on its own internal servers. In doing so, the exchange will hold private keys for faster, more managed trading. A CEX will generally offer a simple interface so that crypto enthusiasts without a technical background can easily begin engaging with assets.
The key benefits of migrating from a CEX to a DEX are also the main considerations one must take into account when choosing a DEX. The three considerations we’ll review today are control, pricing models, and functionality.
Own your information
One key benefit of a decentralized exchange is the ability to control your own private keys and access to information. Owning your private keys means that you alone have full custody of and control over your crypto assets. When you trade on a decentralized exchange, you remove the middleman and complete transactions directly with other users.
The degree of control that comes with a DEX doesn’t really vary amongst individual exchanges, but is an inherent part of the exchange model itself. This means that wanting to own your information may give you a reason to migrate to a DEX in the first place, but may not help you choose your DEX.
Get the best price
With no central authority managing trades between users, technology can help you get the best price for your swap. This is where each DEX begins to differ. When a trade is made, funds go into a “pool” that offers liquidity in the tokens being traded. The rules of each pool will impact the value of your trade. A DEX that allows for multiple pools will provide more options and more competitive pricing.
Where it gets interesting is figuring out which pool will result in the best trade. Polkaswap will offer smart liquidity routing, meaning it will automatically search and source the best pool for your exchange request — thereby increasing your earning potential.
Have the best experience
Once you get past the basics, you’ll find several key features and criteria that differentiate DEXs. One criterion is token access: a DEX with more token pairs available and more liquidity per pair will attract more users and generate more swaps. The latest generation of DEXs promises to enhance token access by bridging blockchains or aggregating liquidity from different exchanges. Polkaswap will offer both of these features. It’s built with Polkadot technology and integrates multiple blockchain bridges. This will allow users to trade ETH and ERC-20 tokens, DOT and KSM, BTC, BSC tokens, and whatever others enter the market in the future. Polkaswap will also aggregate liquidity from across both DEXs and CEXs, meaning you won’t have to register with multiple exchanges to find certain token pairs or the best trade price.
Of course, the technical mechanism by which tokens are swapped matters as well. This ties in with the question of price. Polkaswap is built on the Substrate framework, which is more flexible and scalable than Ethereum. Its parachain-based composability and unique consensus mechanism will enable lower program execution fees, which means you’ll pay less per trade. Polkaswap’s Ethereum bridge will allow it to benefit from these features, while also maintaining access to the vast Ethereum ecosystem.
And for the more adventurous trader or crypto entrepreneur, Polkaswap will allow you to create and list your own tokens in minutes. For those who have tried to have a token listed on a CEX — you know what a challenge this can be.
A DEX for the people
With the public endorsement and adoption of crypto by so many public figures and international organizations, blockchain is here to stay. After a decade, we’re also seeing a real maturity in technology. The launch, growth, and increasing sophistication of decentralized exchanges is undeniable — but what will really help users “cross the chasm” will be easy onboarding and a great user experience. Polkaswap won’t be the first DEX in the crypto universe, but it is striving to be the best, with a comprehensive feature set, innovative technology designed to optimize usability, and a clean, clear design.
For a preview of this design approach, check out Fearless Wallet — a client built by SORAMITSU for the Polkadot/Kusama ecosystem.
Learn more about Polkaswap and try it out here.