The 2018 guide to decentralized crypto exchanges | finder.com
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The 2018 guide to decentralized crypto exchanges

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What are decentralized cryptocurrency exchanges, how do they work and why should you care?

Are you worried about having your cryptocurrency stolen from a centralized exchange? You’re not alone.

From Mt. Gox and Bitfinex to Coincheck and Bitgrail, there have been many well-publicized examples of exchanges being hacked and millions of dollars’ worth of crypto being stolen. Now there’s another way to trade digital currency without entrusting your coins or tokens to a third-party exchange: decentralized crypto exchanges.

Offering peer-to-peer trading and allowing users to retain control of their coins, decentralized exchanges offer a key security advantage over conventional platforms. As a result, they’re experiencing rapid growth at the moment, with several platforms already live and many more in development.

Below we explain how they work and what makes them so important. Our goal is to provide you with the information you need so that you can decide if decentralized exchanges offer the experience that’s right for you.

Learn more Compare decentralized exchanges

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Compare decentralized cryptocurrency exchanges

Decentralized exchanges, sometimes known as DEXs, are booming at the moment and offer a viable alternative for any crypto buyer who doesn’t want to trust a third-party with their funds. You can discover the details of some leading DEXs and the features they offer in the table below.

Name Product Deposit methods Fiat Currencies Supported Cryptocurrencies
Stellarport Exchange
Cryptocurrency
-
XLM, BTC, BCH, USDT, OMG, ZRX, KIN, MOBI & more
Stellarport taps into the Stellar Decentralised Exchange to provide buyers and sellers with access to XLM and various other cryptocurrencies.
CryptoBridge Cryptocurrency Exchange
Cryptocurrency
-
BTC, BCH, RVN, LTC, ALQO, LCC, ECA, SMART, POLIS, BCO, COLX, IC, XP, BWK, HTML, QBIC, ZNY, DOGE, VSX, DASH & over 40+ more
Offering over 80 cryptocurrency pairings, CryptoBridge is a decentralised exchange that supports the trading of popular altcoins.
Altcoin.io Decentralised Exchange
Cryptocurrency
-
*Note that while the platform is under development, it is expected to support BTC, ETH, REP, ANT, BAT, EOS, SALT, CVC, DNT, SNT & 20+ more
Launching in 2018, Altcoin.io is a decentralised peer-to-peer cryptocurrency exchange powered by atomic swaps. Sign up now for early access.
ShapeShift Cryptocurrency Exchange
Cryptocurrency
-
BTC, BCH, BTG, ETH, ETC, FUN, 1ST, ANT, BAT, BNT, BLK, CVC, CLAM, DASH, DCR, DGB, DNT, DOGE, EDG, EOS, FCT, GAME & 25+ more
A global exchange where no account is needed to begin trading cryptocurrency to cryptocurrency.
Orderbook Exchange & ICO Platform
Cryptocurrency
Wire transfer
USD
TAAS, GNO, ANT, 1ST, HKN, BBT, WRC, AMM, OROC, CHSB, GLBX, BENJA
Orderbook is a decentralised cryptocurrency exchange and ICO platform where users can trade Ethereum-based ICO tokens.
DDEX Cryptocurrency Exchange
DDEX Cryptocurrency Exchange
Cryptocurrency
-
EOS, XYO, NPXS, HOT, CNN, ZRX, KIN, NCT, BAX, ZCO, NBAI, POLY, POE, TFD, REN, LBA, TOMO, LND, REQ, IOST, ORI, & 20+ more

Compare up to 4 providers

What is a decentralized exchange?

A decentralized exchange is a platform that cuts out the middleman and allows users to trade cryptocurrency directly with one another. This allows traders to retain control of their funds at all times rather than having to entrust them to an exchange provider, while trades are executed using smart contracts.

DEXs are hosted on a network of distributed nodes, which not only reduces the risk of hacking but also solves the problem of server downtime that restricts the users’ ability to trade. DEXs are designed to offer an open and transparent network that makes crypto trading accessible to everyone.

There are several decentralized exchanges that are already live and offering peer-to-peer trading across a range of cryptos. However, this number is expected to increase dramatically in 2018 with a host of new platforms slated to launch.

How is a DEX different from a centralized exchange?

Centralized exchanges are also online platforms where you can buy or sell digital currency, but unlike DEXs, they require the use of a third party to complete transactions. Both buyers and sellers trust this middleman, the centralized exchange, to hold their assets. This requires the buyer and seller to trust the exchange to safely complete their transactions and securely store their funds.

Known for being easy to use, centralized exchanges allow you to purchase digital currency using fiat or cryptocurrencies. They provide a simple and straightforward entry point to the market and currently account for the vast majority of crypto trading around the world.

For a quick rundown of the key differences between centralized and decentralized exchanges, check out the table below.

Centralized exchangeDecentralized exchange
TradingConducted through the exchangeConducted peer-to-peer
Control of fundsExchange controls your coins and tokensYou control your coins and tokens
Anonymous trading?
  • No
  • Yes
HostingCentralized serversDistributed network
Prone to hacks?
  • Yes
  • No
Subject to government interference?
  • Yes
  • No
Account withdrawal limits?
  • Yes
  • No

Compare some of the most popular centralized exchanges side-by-side in our guide.

What benefits do decentralized exchanges offer?

The key advantage of decentralized exchanges is that they allow for trustless transactions. Rather than surrendering your funds to an exchange and putting your faith in it to complete transactions as promised and responsibly manage your funds, you retain complete control.

On a centralized exchange, even once you’ve purchased crypto coins, you don’t actually own them – the coins are still owned by the exchange until you withdraw them to your personal wallet. On a decentralized exchange, you control your funds at all times and can trade coins and tokens in a peer-to-peer setting.

In fact, it could be argued that centralized exchanges go against one of the core principles of cryptocurrency. One of the key features of blockchain technology is its ability to remove the need for centralized control, while it’s also worth pointing out that most cryptocurrencies are billed as being decentralized. In such an environment, buying and selling digital currency on a centralized exchange seems somewhat counter-intuitive.

There are several other advantages to the DEX approach. The distributed nature of the network substantially reduces the risks of hacking and server downtime, while DEXs also offer minimal fees compared to centralized platforms. Decentralized exchanges also allow users to maintain their privacy and trade without disclosing all their personal details.


Pros and cons of decentralized exchanges

Pros

  • You retain control of your funds
  • You don’t have to trust a third party to safely manage your coins and tokens
  • DEXs provide increased privacy to traders
  • No risk of server downtime causing you to miss a trading opportunity
  • Lower trading fees than centralized exchanges
  • The introduction of atomic swaps will allow DEXs to offer faster and more efficient trading
  • Lets you avoid transaction and withdrawal limits typically imposed by centralized exchanges
  • Their decentralized nature reduces the risk of government regulation or crackdowns

Cons

  • Not always as easy to use as conventional exchanges
  • Can be intimidating and confusing for new users
  • Many don’t yet provide as many advanced trading tools as centralized exchanges
  • Currently, don’t offer as much liquidity as centralized exchanges
  • Some platforms offer limited customer support
  • Lack of regulation may concern some users

What to consider when choosing a decentralized exchange

Decentralized exchanges vary quite a bit in terms of their user-friendliness, fees, customer assistance and even the digital currencies they support. With this in mind, you’ll need to thoroughly compare the features of a range of DEXs before deciding on the right platform for your needs. Factors you should consider include:

  • Ease of use. DEXs often have a steep learning curve and can be difficult for newbies to understand. Take a look at each exchange’s trading interface to see how easy it will be to use.
  • Security features. Check for any additional security features the platform offers to help protect your funds. For example, some platforms allow you to directly link your hardware wallet to the trading contract.
  • Currencies available. Which coins and tokens can you trade on the platform? Are all your desired currencies supported, and how/when are new coins and tokens listed?
  • Trading volume. How much trading volume does the platform currently maintain? Is there enough liquidity to support your trading needs?
  • Transaction fees. Check the fine print for details of the platform’s trading fees and any other charges that may apply to transactions.
  • Sign-up process. How quick and easy is it to register for an account? What details do you need to provide?
  • User reviews. One way to get a better feel for the quality of an exchange is to check out some independent reviews. This will help you find out what sort of experience other users have had on the platform and whether they’ve had any problems or concerns.

By considering these factors and comparing the features of a range of platforms, you should be able to find a decentralized exchange that’s right for your needs. And, if you want to buy or sell cryptocurrency without exposing yourself to the security risks associated with a centralized platform, it’s a task well worth doing.


Images: Shutterstock

Disclosure: At the time of this writing, the author holds IOTA and XLM.

Tim Falk

A freelance writer with a passion for the written word, Tim loves helping people find the right products for them. When he's not chained to a computer, Tim can usually be found exploring the great outdoors.

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