Continuing the series of articles about DeFi use cases in the Web 3.0 world. Today, let's learn more about another application with FinFan, which is a decentralized exchange.
Imagine you are participating in a stock market or some financial investment market with fiat, you must often register an account at the corresponding exchange and that exchange holds all your information.
That's what happens every day on centralized exchanges when your information is gathered in one place and held by one party, the companies that create the exchange.
Decentralized exchanges are the opposite, your information will be encrypted and distributed into blocks using blockchain technology. At that time, the exchange only stands in the middle of receiving and appraising new coins of projects and at the same time receives investment requests from investors in that project.
Topping the list of the best-decentralized exchanges is Uniswap — Ethereum's first and largest DEX. Uniswap is a perfect exchange for those who want to earn interest on their assets. This platform is extremely popular; Its average daily volume often exceeds $4 billion. As an AMM DEX, Uniswap manages its decentralized liquidity pool through an algorithm with the aim of determining the best swap rate for each trading pair.
Clients can use established liquidity pools or even create their own. Liquidity providers make money from trading fees. The platform is entirely governed by a DAO, meaning Uniswap users are the ones in control.
Next, we have OKX DEX — a decentralized exchange powered by OKX, OKC's blockchain. OKC is a collection of open-source community chains looking to promote large-scale commercial applications. OKX's DEX has a decentralized, borderless, secure, and non-custodial trading platform.
OKX DEX can offer a seamless trading experience with relatively low trading fees. This DEX's chain focuses on providing better, more specialized infrastructure than Ethereum. This makes it an attractive option for dApps, DEXs, and other blockchain products.
Despite being a relatively new DEX, ApeX Pro is known as one of the best decentralized exchanges thanks to its flexible AMM model. This model improves capital efficiency and makes transactions more like spot trading. ApeX Pro also has an order book interface, making it more accessible for beginners.
The platform integrates StarkWare's L2 scalability engine for enhanced security. If ApeX Pro stops working, traders can use this tool to get their money out. This exchange even has up to 20x leverage for any token in the derivatives market.
Next on the list is Curve, one of the best-decentralized exchanges for traders concerned about volatility. Curve is an AMM DEX, and, like Uniswap, Curve uses Ethereum's decentralized network.
However, Curve is also unique in several respects. This DEX has a token, CRV, that can be used for governance by giving voting rights to owners.
Ranked fifth on the list of best-decentralized exchanges is KyberSwap. This is the flagship product of Kyber Network. Often compared to Uniswap, this is also an AMM DEX, although it has some features that make it stand out. The platform works with multiple liquidity pools.
Furthermore, KyberSwap's pools are larger than most other DEXs. This is why many DeFi applications use KyberSwap as the underlying protocol. The platform rewards each liquidity provider with a 0.3% fee when a specific pair is traded. All rewards and trading fees are paid in KNC, the exchange's native token.
Almost all centralized exchanges require you to go through a very strict KYC and AML process to ensure that you are not a machine and do not commit illegal acts such as money laundering or corruption.
This is of course completely true as decentralized exchanges require users to have a lot of knowledge about the financial market on Web 3.0 to be able to participate.
Therefore, the number of people participating in centralized exchanges is extremely large, thereby increasing the liquidity of this market.
The biggest weakness that centralized exchanges bring is the security of information. Information on centralized exchanges is often attributed to one source, the creators of the exchange, so the phenomenon of buying and selling information as well as modifying information can easily occur if the leaders of the exchange take illicit action.
At centralized exchanges, the money you pour into the exchange to invest can be attributed to a connection, the floor owner, who will then balance the liquidity between the seller and the buyer. At that time, it will easily happen that the floor owner will hold a large amount of money later.
For example, the case of Sam - CEO of FTX that took place last year or the scam that caused the cryptocurrency market to collapse by Do Kwon.
It can be said that the purpose of creating a decentralized exchange is the same as the purpose of creating other types of decentralized finance, which is to overcome the weaknesses that centralized types give.
Specifically, the decentralized exchange will solve the problem of centralizing information and transaction amounts in one place to completely overcome the above mistakes of a centralized exchange.
Besides, this model still has some disadvantages: the interface is not user-friendly, leading to poor liquidity. At the same time, due to the complex nature of the code that makes decentralized exchanges and decentralized exchanges, they often do not update as many functions as centralized exchanges, which makes users feel less interested.