Hello and welcome back to my blog.
With the recent Hive Hard Forks, many people complain about how they are stuck and can't withdraw or send their Hive to their Binance or Bittrex account. This just shows how much of the crypto assets are being held by these centralized exchanges. But we have always had an alternative to that - Decentralized Exchange (Dex).
Decentralized Exchanges are those exchanges where there are no third parties present to facilitate your exchanges and they run on a piece of software called smart contracts. Many of the popular Dex have features like liquidity pools, open source code, no KYC etc.
Why DEX?
No Middleman, safer wallets
As there is no centralized authority that controls and holds your crypto, it is one less point of failure. When you hold your crypto in centralized exchanges like Binance, Coinbase etc, there is a chance you might lose your tokens in case these exchanges get targeted by hacks and other attacks.
Anonymous (No KYC or verification required)
You can use these Dex without doing any verification, unlike the centralized ones. In most cases, the only thing you require is your wallet and can use these without even signing in to their websites.
Open source
Most of the Dex is open source meaning anyone can utilise the existing code and make changes to the code and publish them. You will see many swaps in the markets like uniswaps, sushiswap, pancakeswap, thisandthatswap.
Other ways to earn
You can earn some interest by locking your tokens in a liquidity pool and get a fraction of the rewards when people use that pool for exchanges. Some of the new pools provide huge interest. But beware of some of them, there can be many scams that take place in those pools. An example is the infamous Rugpools in which a large investor/staker pulls almost all the liquidity effectively making the pool useless. Do your own Research
While there are obvious advantages to using Decentralized Exchanges, one must also look at some of the shortcomings of DeFi.
One such shortcoming is a difficult interface/UI. Most of the Dex has minimal pages on how to do swaps and tutorials using their websites. These Dex can be difficult for beginners with the jargon thrown away like slippage, pools, bridges etc.
It has become so much easier to scam with new tokens using these Dex. Many people only trade by looking at the price action rather than doing proper research and checking out the fundamentals and before you know the scammer mints shitloads of new tokens and dump them on the market, making your coins worthless.
As we like to say, with great power comes great responsibility. So, always "do your own research (DYOR)".
Thanks for reading...
Until next time.