Decentralized exchanges (DEXes) are decentralized financial platforms (DeFi) that allow users to trade cryptocurrencies without the need for a central authority to facilitate trades. Users trade directly with each other, known as peer-to-peer transactions, using smart contracts by connecting their digital wallets to a DEX.
The Polygon blockchain offers a fairly wide variety of DEXes with useful features like swapping and trading crypto and staking Matic in liquidity pools for high returns. A key advantage of Polygon is the low transaction fees. Polygon is a Layer 2 solution that operates on top of Ethereum. It aims to address the limitations of Ethereum - i.e. high transaction fees and slow processing speeds.
Key Takeaways for Creators and Collectors
On the Polygon blockchain, several DEXes allow users to trade cryptocurrencies in a decentralized manner. These DEXes offer a variety of functions, including:
High level of security as users maintain control over their private keys, and trades are executed using smart contracts - there is a much lower chance of hacking attacks
Greater transparency in the form of a publicly auditable ledger which allows users to verify transactions
High levels of liquidity meaning that users can easily buy and sell cryptocurrencies without the need for a centralized order book (though, on average, a CEX will have higher liquidity)
Lower fees than centralized exchanges as they do not require a centralized authority to facilitate trades
Opportunity to swap a very wide variety of tokens as DEXes frequently include a wider variety of tokens than many centralized exchanges
Opportunity to earn passive income with high-interest staking and supplying tokens as collateral to enable borrowing (high-interest DeFi products are risky; DYOR before investing)
Want to learn more about decentralized exchanges? Check out some of Polygon's leading DEXes.