The recent explosion in the popularity of DEXs (decentralized exchanges) demonstrates the desire for more alternatives by consumers. DEXs differ from their centralized counterparts in many ways. They provide many advantages that centralized platforms are unable to. Consequently, more traders venture into the DEX market daily. Here are 5 reasons you should consider adding a DEX to your trading strategy.
The top reason to utilize a DEX is privacy. Unlike CEXs, DEXs don’t require KYC and AML regulations to be met by users. Towards the end of 2017, regulators began to focus on large centralized exchanges. This scrutiny led many of the top platforms to institute a variety of regulatory requirements. Each of these requirements stripped you of your privacy even more.
Since DEXs don’t hold your cryptocurrency directly, they avoid the need to adhere to these custodial requirements. Keenly, most DEXs don’t even require users to register. Instead, you simply link your wallet to the DEX to begin trading. Wallets such as Metamask provide one-button connectivity which streamlines the onboarding process for new users. Once your wallet is linked, you can start trading without delay.
The majority of DEXs in operation today are non-custodial. This designation means that they never hold your cryptocurrency directly. For example, to trade on a platform like Binance or Coinbase, you first need to upload your cryptocurrency to a network wallet. Then, you can trade these assets with others on the market.
The downside to this approach is that it leads to a concentration of users’ funds online. In turn, these network wallets make the ideal bounty for hackers seeking some easy targets. These issues are evident to the market as the number of CEXs hacked has continually increased over the last five years.
DEXs don’t operate as custodians. Instead, they function more like your favorite streaming website in that they simply connect two parties directly. These two parties exchange their assets in a peer-to-peer manner.
The advantages of this approach are easy to see. For one, you always have access to your crypto. Anyone who has ever seen a down for maintenance sign on the favorite CEX can attest to the frustration of these occurrences. Additionally, there is no real draw for hackers to target a DEX.
When you look at the prospect of hacking a single wallet versus a wallet containing the crypto holdings for thousands of users, it’s easy to see why CEXs continually come under attack. Also, many DEXs operate using open-source code. This strategy ensures that there is no funny business going on behind the scenes. It also enables users to vet the platform directly.
DEXs usually charge fewer fees than CEXs. For one, they eliminate the middlemen from the equation. This move reduces the overall cost of trading. Large CEXs like Coinbase are notorious for fee hikes. They also can charge projects huge fees to list their tokens on the platform.
In comparison, DEXs like Uniswap provide an open market to projects and start-ups seeking access to capital. These networks enable anyone to seed a liquidity pool simply by depositing a corresponding amount of their proprietary token and a base cryptocurrency such as Ethereum.
The introduction of a more affordable way to access global funding has helped to drive innovation in the sector. DEXs provide an excellent selection of tokens to the market that can’t be found on any CEXs. The open enrollment of these projects makes it simple for start-ups to release their tokens.
Additionally, the recent expansion of new DeFi blockchains into the market has also created a variety of sub-networks. Each of these platforms has tokens that are unique to its ecosystem. For example, PancakeSwap offers users access to a selection of Binance Smart Chain projects not available on Uniswap.
The META 1 DEX provides secure non-custodial peer-to-peer trading options to the market. The network combines a variety of classic features with DeFi options to produce a unique experience for users. As such, META 1 continues to attract new traders seeking a more streamline trading experience.
Another major reason why DEXs continue to gain momentum in the market is their tendency to accept global clientele. CEXs can provide services only to those individuals located in approved parts of the world. This can leave large portions of the market inaccessible to traders who reside in these regions.
DEXs eliminate this issue by providing open enrollment to all traders. These exchanges pay no attention to your country of origin, political preferences, or religious views. Instead, they operate as unbiased code that enables anyone to gain access to the decentralized economy.
Of course, not everything is better when you utilize a DEX. The main downside of DEXs is also their main benefit, open access. Since anyone can use these networks to access the market, there is no protection in place to prevent scammers. Fraudsters have been known to make projects with duplicate names and logos to confuse new users. For these reasons, you must always DYOR (do your own research) when investing in a DEX.
It’s recommended that you double-check any contract addresses before sending funds. Remember, there’s no refund on the blockchain, so any mistakes could prove to be costly errors. To avoid these losses, you must always confirm your data and your token’s destination.
5 Reasons to Try A DEX out
DEXs are now an integral part of the market. However, there is still a slight learning curve when you make the swap. For example, many DEXs require you to hold the native blockchain’s token to conduct transactions. In most instances this is Ethereum. Also, there are fewer features in terms of order types when using a DEX. Regardless of these shortcomings, adding a DEX into your trading strategy is a smart way to improve your overall success rate.