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Decentralized Exchanges (DEXs) are peer-to-peer digital marketplaces where transactions are conducted. These transactions are carried out without needing a third or superior party. These transactions are conducted via smart contract, which uses automated agreements written in code. Not to be confused with centralized exchanges like Coinbase and Binance, DEXs are usually built on the Blockchain. It’s also important to note that DEXs were built to ensure that activities performed within a specific exchange are decentralized.
Most of the DEXs found in the crypto space are built on the Ethereum Blockchain, supporting smart contracts. Also, like centralized exchanges, DEXs charge transaction fees from users who transact and use their services. While the advantages of DEXs are speed, token availability, and reduced security risks, it possesses their disadvantages. One of such disadvantages of DEXs is high gas fees, which has limited their popularity and growth. This article will be looking at the top 5 decentralized exchanges on Polygon.
How Does A DEX Work?
Using a DEX is quite simple and does not involve a sign-up process like a centralized exchange. A user is only expected to have an internet-enabled device for connection and a crypto wallet. These wallets must be compatible with the smart contracts on the DEX’s blockchain network. To make the process seamless, the user is expected to have the native token of the DEX’s Blockchain on the wallet. There are three main types of DEXs: Automated Market Maker (AMM), Order Books DEX, and DEX aggregator. The AMM DEX, largely inspired by Ethereum’s Vitalik, relies on smart contracts created to solve liquidity problems. Alternatively, Order books DEX compile ledgers of all open orders to buy and sell assets for specific asset pairs. In the DEX aggregator, there is a usage of variant protocols and mechanisms to solve problems associated with liquidity in the decentralized finance sector.
What Is Polygon (MATIC)?
Polygon is a unique Blockchain scalability platform that aids and unites Blockchain networks compatible with Ethereum. Created in 2017 as MATIC, Polygon is also referred to as Ethereum’s internet of Blockchain because of its connectivity capabilities. Since its launch by Jayanti Kanani ad co., it has aggregated scalable solutions to support a multichain Ethereum space. The Blockchain is also a Layer-2 aggregator, built based on Ethereum and complemented with fundamental features. The network is powered by its native token- MATIC, which has a $17 billion market cap. According to CoinMarketCap, Matic is ranked as the 15th largest cryptocurrency. MATIC is a utility token and can be used for staking and validating transactions in the Blockchain. It is also worth noting that Polygon offers developers various tools to create high-solution blockchain protocols and DEXs. Polygon is also an aggregator of DEX and a unique high-solution offering of the vast Blockchain network.
Top Five DEX On Polygon In 2022
The rising high cost of gas on Ethereum has continued to force Blockchain projects to look for alternatives. Simultaneously, this has coincided with the rising influx of projects into Polygon, as it charges cheaper fees than Ethereum. While it is cheaper, Polygon doesn’t compromise on the security and interoperability offerings of the Ethereum network. However, listed below are the top five DEXs on Polygon making waves in 2022:
With a Total Value Locked of more than $790 million, Quickswap is one of the most valuable DEXs on Polygon. The Automated Market Maker (AMM) DEX is an alibi of the Uniswap protocol, offering users the same features and experience. However, while Uniswap runs on Ethereum, Quickswap utilizes the cheap service of Polygon to deliver premium service. This has resulted in the high popularity of the DEX and the high rate of crypto users utilizing its services.
Sushiswap is also another fork of Uniswap and one of the most popular DEX on Polygon. However, unlike Quickswap, it has its governance token used for various purposes. SUSHI holders control the protocol and also earn bounty rewards on staking. Sushiswap was operating on Ethereum but switched to Polygon to enjoy the swift speed and affordability of the aggregator protocol. It is currently one of the best DEX on Polygon, with users committing more than $5 billion in TVL.
#3 Firebird Finance
Firebird Finance is a 3-in-1 Defi platform currently thriving on Polygon and offering immense bespoke services to many users. It is a yield aggregator, a vault, and also poses as an exchange. The DeFi platform not only guarantees rewards for its users but also optimizes their experience. Its swap page with yield farming features also ensures that traders and yield farmers earn rewards. The native token of the platform is HOPE, and its holder also receives a reward for staking it. Firebird Finance is also popular for incorporating technology into its protocol, a unique feature of the AMM. At the time of writing, the TVL in the DEX is $33.6 million.
#4 Polycat Finance
Polycat is one of the latest projects to have joined Polygon, and its growth has been remarkable. The DEX is also the first to offer Initial Farm Offerings (IFO), allowing investors to earn massively on stakes. Another benefit of the IFO is that it exposes investors to farming opportunities within the ecosystem. Also, in a bid to attract investors, Polecat stakes the deposit fees from its farms and pools. The proceeds are then used to buy and burn FISH- its native token. This, and more, is one of the reasons why Polycat is currently making waves on Polygon. The investor attraction of the DEX platform is evident in its portfolio, which possesses an impressive $23 million in TVL.
Launched in August 2021, Polydex is one of the few DEXs changing the face of traditional DEXs on Polygon. The DEX is a fork of Pancake Swap but possesses features that make it faster and more scalable. The platform offers users a seamless and stress-free experience and a gasless one. It is no wonder why it is so popular amongst users and has easily made its way to the top. The platform also offers a unique reward interface model for its Yield farming termed Elastic Yield Farming (EYF). The current TVL in the DEX is $4.4 million, as it continues to increase in popularity.
The popularity of DEXs has continued to increase in the Blockchain ecosystem, with Ethereum providing a home for them. However, the status quo is changing, as Polygon seems to be offering irresistible services. The Ethereum-powered Blockchain now hosts most of the leading DEXs in 2022, offering speed and lower fees than Ethereum. With a TVL of $9.2 Billion, it is expected that more DEXs will deploy on Polygon.