Decentralized exchanges (DEXs) have become a kind of response to the introduction of the “know your customer” (KYC) policy. As soon as this began to interfere with traders, an alternative appeared for those who do not want to reveal their identity. However, there is a downside here. We will tell you about the pros and cons of decentralized exchanges using the example of QuickSwap, SushiSwap. You will also find out what to expect from those who have just appeared on the market — using the example of HoliDEX from Lado Okhotnikov’s Holiverse.
How it all started
At first, the world of cryptocurrencies was dominated by centralized exchanges (CEXs), through which users could buy and sell tokens. However, with the advent of smart contracts, the era of decentralized exchanges began. One of the key tools of this transition was the Uniswap protocol, which was the first to popularize the idea of trading ERC-20 cryptocurrencies without intermediaries.
Later, Balancer appeared, expanding the capabilities of DEX, offering flexible liquidity pools and new trading models.
Then SushiSwap with a new system with Automated Market Makers (AMM) came into play. Now, instead of waiting for someone to buy or sell a token, AMM uses special funds called “liquidity pools”. That is, when a user wants to trade, they launch a smart contract that automatically calculates the price based on the current volumes in the liquidity pool. This approach eliminates the need to use an order book, which is typical for centralized exchanges.
But, like any system, DEX also has its advantages and disadvantages.
Pros and cons of DEX
The main advantage of decentralized exchanges is the security of using cryptocurrency. Users’ funds remain in their crypto wallets, which reduces the risk of hacking or theft. Other pros:
- privacy: no need to go through the KYC identification procedure, which allows you to maintain anonymity;
- freedom of choice: a variety of tokens and cryptocurrencies are available for purchase and exchange, including those that are not available on traditional exchanges;
- low fees: fees on DEX are usually lower than on centralized platforms.
An important disadvantage is that you cannot buy cryptocurrency for regular money — fiat. Most DEXs support only cryptocurrencies, which makes it difficult for new users to enter, who must first buy a token through an exchange or the same CEX. Other cons:
- if the token address turns out to be incorrect, users can lose their assets;
- slow transaction speed: on some platforms, high network congestion can lead to delays in transactions. This makes instant order execution impossible, which is critical for scalping (fast trades).
DEX review
There are several popular networks on which decentralized exchanges are built. These include Binance Smart Chain (BSC) with low fees, Solana with high transaction speed, and Avalanche with high scalability.
However, among all these networks, Polygon (formerly Matic Network) suited DEX developers with its balance between speed, cost, and support for a variety of projects. This network has become one of the most popular platforms for creating and launching decentralized applications (dApps), including such well-known metaverses as The Sandbox and Decentraland. That is why many DEX platforms have been created on Polygon, focused on providing the most convenient and fast cryptocurrency exchange for their users.
Let’s look at the most interesting decentralized exchanges using an example and see if there really is a big difference between projects built on different networks.
QuickSwap
One of the largest DEXs on the Polygon network, offering a wide selection of trading pairs and support for many different tokens.
Advantages:
- transaction speed: thanks to the use of the Polygon network, QuickSwap offers high transaction processing speed — on average, a transaction takes 10 to 15 seconds, which distinguishes it from similar DEXs on Ethereum, where a transaction can take up to an hour depending on the network load;
- low fees: the fee is 0.25%, when on DEXs operating on Ethereum the fee is 0.3%;
- wide range of assets: QuickSwap supports a large number of tokens, including popular cryptocurrencies Ethereum (ETH), wrapped Bitcoin (WBTC), stablecoins USDT, USDC, DAI and 400 other coins.
The disadvantages of the exchange include the lack of customer support.
HoliDEX
A new decentralized exchange launched in the Polygon network, immediately attracted attention due to its high performance. On the very first day of operation, the trading volume on HoliDEX exceeded 1.1 million, which allowed it to enter the top 10 DEX in the Polygon network. The total locked value was more than 1 million, despite the fact that at the time of launch, only one trading pair was available — POL / USDT.
HoliDEX exchange interface. Source: dex.holiverse.ai
The exchange uses Automated Market Making (AMM). In the near future, it is planned to launch a trading pair with the Holichain (HC) token, which is a key element of the Holiverse ecosystem. Despite the recent update of the project, HoliDEX demonstrates high liquidity rates, which attracts new users.
Advantages:
- users can learn to manage cryptocurrencies and DeFi instruments in the process;
- rewards and bonuses for completing certain programs;
- social networks and platform communications provide complete accessible information about the capabilities of the DEX.
Disadvantages include the recent launch: the exchange still needs time to fully operate.
Sushi Swap
A popular DEX that operates on the Ethereum blockchain and is a universal platform for exchanging a wide range of ERC-20 tokens.
Advantages:
- the exchange is highly liquid due to a large number of participants;
- users can earn by providing liquidity to liquidity pools, receiving part of the commission fees from each transaction;
- owning the $SUSHI token gives the right to vote in the management of the platform and participate in the distribution of profits;
- SushiSwap collaborates with projects in the DeFi sphere, for example, with Aave, a decentralized platform for lending and borrowing cryptocurrencies, which expands opportunities for users and increases the growth potential of the platform.
Disadvantages:
- high (from 0.3%) gas fees: working on Ethereum is associated with high fees for transactions, especially during periods of increased network activity;
- interface complexity: new users may find the SushiSwap interface complex and unusual.
DODO
DODO DEX interface. Source: dodoex.io
A decentralized exchange based on the Proactive Market Maker (PMM) algorithm, which differs from traditional Automated Market Makers (AMMs) and is designed to improve liquidity and pricing accuracy. DODO runs on the Ethereum and Binance Smart Chain (BSC) blockchains.
Advantages:
- PMM algorithm: Proactive Market Maker allows for more efficient liquidity management, minimizing slippage and improving pricing accuracy;
- Impermanent Loss minimization: using PMM helps reduce losses associated with asset price changes in the liquidity pool, making liquidity provision more profitable for providers;
- low fees: transaction fees on DODO are slightly lower than on other DEXs that use traditional AMM models;
- convenience for liquidity providers: liquidity providers can choose how many assets to contribute to the pool, which increases control over investments;
- multifunctionality: in addition to trading, DODO offers various additional opportunities to earn money, including liquidity aggregators, auctions, and reward programs;
- ownership of the $DODO token gives the right to vote in the management of the platform and participate in the distribution of profits.
Disadvantages:
The complexity of the PMM algorithm in DODO, which is also its advantage, can become an obstacle for new users, since they simply will not understand how prices are formed, and this will force them to abandon the use of this protocol in favor of simpler AMM models, where the price is determined more easily.
Conclusion
In 2025, decentralized exchanges will only gain more popularity. Many will switch to such platforms, especially against the backdrop of tightening control over centralized exchanges. In addition, large players will begin to enter this market, because the transparency of DEX is a serious advantage. As a result, decentralized exchanges will definitely occupy their niche and take over part of the DeFi market.
