Being able to trade without complications or requirements. This is the purpose of decentralized exchanges (DEX) that work through smart contracts created on a blockchain and not through an orderbook.
As with centralized exchanges, to buy and sell on a DEX, users must deposit funds to have the balance to trade cryptoassets. The entire operation takes place without intermediaries, through the automated execution of protocols, with transactions recorded in a blockchain. Learn about the process of some of them.
Developed by Uniswap Labs, the Uniswap protocol is designed for cryptocurrency exchange (ERC-20 Tokens) on the Ethereum network. It has a set of smart contracts designed to prioritize user safety without the need for intermediaries.
There are three versions of the protocol, V1 and V2, being open source and licensed under the GPL (public license). V3 is open source, with minor modifications. Together, the three versions account for more than 30% of the market share. V1, which on August 18, 2021, ranked first among the top crypto brokers according to CoinMarketCap, exceeded US$ 2 billion in transaction volume within 24 hours.
Like other decentralized exchanges, the difference between Uniswap and traditional exchanges is the Automated Market Maker system ( or AMM), which replaces the orderbook.
The AMM replaces the purchase and sales orders with a liquidity pool of two assets, which are valuated against each other. When one asset is traded by the other, the relative price of both changes and a new market-rate is determined. In this dynamic, buyers or sellers negotiate directly with the pool.
In addition, Uniswap is fully public with no restrictions such as geographic location, asset or financial situation, or age, among others.
Uniswap’s native token is UNI, whose maximum supply is 1 billion units. Currently, 587 million of them are already in circulation.
With a transaction volume of more than US$ 1.1 billion in 24 hours (as of 08/18/2021), PancakeSwap occupied the second position on the date, according to CoinMarketCap.
The exchange, created in September 2020 through a fork of Uniswap code, was developed based on the Binance Smart Chain, making it the leading platform outside the Ethereum network.
It also uses AMM, dismissing the orderbook and allowing transactions through liquidity pools, just like Uniswap, but at lower rates than the competitor.
Its native token is CAKE, which, although not limited to supply, has mechanisms for burning units to keep the offer balanced.
1inch Liquidity Protocol
The exchange that created the 1inch token is a decentralized transaction aggregator (DEX), which connects multiple DEXs on a single platform. This allows users to find the most efficient exchange options available on the various platforms.
The efficiency of this process comes from the DEX aggregators, which eliminate the need for manual verification and is its great differentiator.
These aggregators can offer users better token trade rates than any single DEX, in the shortest possible time. In addition, 1inch has also launched Mooniswap, its own AMM.
Raydium is an automated market trainer (AMM) and liquidity provider based on the Solana blockchain for the decentralized Exchange Serum (DEX). But unlike other AMMs, it provides chain liquidity for a central limit order wallet, which means that deposited funds are converted into orders, which are in Serum’s order wallets. This gives Raydium access to Serum’s entire order flow as well as its existing liquidity.
Its native token is RAY, which was released in February 2021 with 555 million units. 34% of them will be released as mining incentives over three years. Another 30% are reserved for partnerships and expansion of the Raydium ecosystem.
Serum, created by FTX in August 2020, is one of the decentralized exchanges with complete resources built on the Solana blockchain. Its popularity stems from the low cost and high speed in operations.
The network was started with two tokens: a discount and staking token with limited governance rights, called Serum (SRM), and another that allows even more trading discounts called MegaSerum (MSRM). Then, in early 2021, it announced four new tokens with solutions such as maps and streaming services. Today, Serum is a decentralized exchange and crypto ecosystem.