Cryptocurrencies have come a long way. From a time when they were severely distrusted to now where they are accepted worldwide. Although a decentralized network powers these digital assets, most trading often happens on centralized exchange platforms. For many years now, you had to have an account on a centralized exchange to be able to buy or sell the cryptocurrency you needed. Although there is nothing wrong with using a centralized exchange, it’s important to know that your funds are at risk every time you are buying or selling.
Centralized exchanges such as Coinbase, Binance, or even Bittrex have been hacked before and can be hacked again. What’s more, unlike fiat banks, these sums of money aren’t insured, and therefore the company has no fiduciary duty to reimburse clients for their lost funds. We can use smart contracts to implement trading in a trustless and anonymous way to solve this problem. For this reason, decentralized exchanges (DEXs) were built. Most of these decentralized exchanges are function similarly to their centralized counterparts. The only difference is that they run on smart contracts.
Differences between DEXs and centralized exchanges
Although most of the DEXs are created from the original centralized exchanges, they have some advantages that their centralized counterparts do not have. First, there is little to no third party risk. Also, no listing fees for the tokens being announced, and lastly no KYC, meaning you can stay anonymous if you so wish.
Although transactions on DEXs are trustless leveraging smart contracts, their interfaces are highly similar. Their order books look almost alike, and the liquidity issues still persist. To keep up with the transactions on centralized exchanges, they have invested heavily in market makers. This is to make sure that every transaction is processed well and in good time. Unlike their centralized compatriots, DEXs are maintained by the community.
Token swapping is a concept that is relatively new in the crypto market. This is essentially the process whereby we can transfer cryptocurrency between two blockchains. In this process, one startup is going to use another’s underlying blockchain technology to raise funds to build their own network and then migrate their existing tokens to the new network. Token swaps can be very lucrative when applied the right way. Here are a few legitimate swappers that are taking up market share.
This is one of the latest token swappers recently launched. Here, all tokens are traded using smart contracts. The user experience has much improved, and there is no order book. You can choose to participate as a casual user, liquidity provider, arbitrageur, or staking holder on this platform. Once you choose which role is best for you, you can then start working as soon as you want. As a liquidity provider, you can receive corresponding tokens, which you can use to stake for high-profit rates.
This is yet another token swapper where you can easily trade without giving up your control over the tokens being sold. On this platform, you can choose to participate as a liquidity provider or a casual user. Established back in 2018, this platform got people’s attention this year when they announced that they would be distributing about 60% of their genesis tokens to their initial users. This platform supports almost all Ethereum tokens; therefore, it shouldn’t be difficult to find what you are looking for.
This is another swapping platform where the users are given an opportunity to be more than regular users. On Curve Finance, you have the opportunity to become a liquidity provider. Although it wasn’t decentralized when it launched, they have made the transition this year and even rolled out their governance token. Unlike the other two highlighted above, this platform only offers support for a few coins. The management says that the platform is for stablecoins and tokens on Ethereum.
Although these tokens swappers are making moves very fast, they still haven’t reached the usability and functionality traditional crypto exchanges have. As time goes on and innovations in this area get better, will token swappers have a chance against vanilla crypto exchanges?