About 40% of 40,000 poll respondents say they plan to buy cryptocurrency this 2023. That suggests how cryptos are still in high demand despite their extreme volatility.
So if you’ve always wanted to try investing in crypto, now’s a good time. One reason is that Bitcoin (BTC) and Ether (ETH), the most valuable types of crypto, are still cheaper than in 2021. They reached an all-time high ($68,000 for BTC and $4,800 for ETH) back then but are now down by over 50%.
Besides, exchanging crypto via a decentralized crypto exchange (DEX) is easier than ever.
In this guide, we’ll talk about the pros and perks of DEXs and why you should use one, so read on.
1. Become an Anonymous Crypto Investor
A DEX is a platform built on top of a non-custodial blockchain system. Non-custodial means no other parties, except for the traders, handle transactions. This is also why DEXs don’t require users to undergo a Know-Your-Customer (KYC) process.
By contrast, a centralized exchange (CEX) has a KYC process, as a central entity controls it, hence the name. This intermediary must know the seller and buyer to complete the transactions. So with a CEX, you must reveal your identity, whether you buy or sell cryptocurrencies.
With a KYC process, you must give your personal information, such as your name and address. Some CEXs may also require a copy of a government-issued valid identification card. They may even ask you to take a selfie while holding your I.D. to verify your identity.
So if you don’t want to go through all those steps and remain anonymous while trading, you should use a DEX. That way, you can maintain the privacy you cherish. But first, ensure this crypto exchange you plan to use works with your crypto wallet.
2. Trade Immediately
Suppose your crypto wallet is compatible with your chosen decentralized exchange platform. In this case, you only need to log in to the DEX with your private key. After that, you can start buying, selling, and trading your desired cryptocurrencies immediately.
If you use a CEX, you must wait for the platform to finish the KYC process. How long it takes depends on the exchange, but it can take hours, sometimes weeks. You can’t perform any transactions during this time: no buying, selling, or trading.
That time-consuming verification process can make you miss out on money-making price swings. Remember: Cryptocurrencies’ volatility is the reason they bring high rewards. But to take advantage of this, you must trade them quickly, a process that a CEX may not offer immediately.
3. Lower Transaction Fees
Another advantage of trading on a DEX is not having to deal with an intermediary. Instead, you transact directly with other traders. And since there’s no third party involved, you can expect its transaction fees to be lower than CEXs.
4. Remain Unbanked
According to the latest federal statistics, the U.S. had 5.9 million unbanked households in 2021. “Unbanked” means no household member has a bank or credit union account.
Some unbanked individuals say it’s a choice, as they don’t trust banks. If you’re one of these folks, you’d be happy to know that a DEX allows you to remain unbanked.
As mentioned above, DEXs don’t require users to complete KYC processes. This is also why they don’t need traders to link bank accounts to the platform. Instead, you can fund your crypto wallet through other means, such as cash deposits via a crypto ATM.
On the other hand, many CEXs require you to link a bank account to the platform to fund your trading account. This also allows them to verify your identity further.
5. Autonomy Over Private Keys
Since DEXs are non-custodial, they enable users to handle their private keys as they wish. So if you’d rather not have anyone else having potential access to your keys, a DEX is the way to go.
However, remember that your private keys are the only way to unlock your digital assets. Therefore, losing them means losing access to your cryptocurrencies. A DEX can’t help you retrieve them since they don’t hold your keys in the first place.
The good news is that you can safeguard your private keys with a cold wallet. A cold wallet is a device that doesn’t require an Internet connection, like a USB or external hard drive. Since it’s not Internet-reliant, it can help reduce your odds of cybercrime and hacking.
However, you should still use a cold wallet with additional security features. These should include multiple authentication protocols, like a PIN and biometrics.
Keep your cold wallet in a safe, secure spot, like a vault to which only you know the password. Lastly, never share your private keys and your wallet’s passwords and PIN codes.
6. More Cryptocurrencies Supported
Since Bitcoin’s creation, over 22,000 other cryptocurrencies have appeared. Interestingly, less than 9,000 are active. That’s still a lot, though, with many more new ones expected to come out as crypto becomes more in demand.
The good news is that DEXs often support many cryptocurrencies, including brand-new ones. For example, they let you buy new cryptos, provided your crypto wallet has enough funds. You can also trade them for another or sell them directly to a buyer on the same exchange.
DEXs have that ability since no one regulatory authority oversees them. By contrast, CEXs do, resulting in them having to abide by stringent restrictions. Such limitations often extend to not providing support for new tokens.
So while CEXs also let you trade various cryptocurrencies, they may not be as many as those on DEXs. Moreover, they usually hold off on offering brand-new cryptocurrencies.
Consider Using a Decentralized Crypto Exchange
Now you know that a decentralized crypto exchange offers more privacy and anonymity. You don’t even need a bank account to start using a DEX. Plus, it gives you more control over your private keys and often has lower transaction fees than a CEX.
So, if those perks sound great to you, consider using a DEX for your crypto trading transactions.
If you liked this article, you’d love our other cryptocurrency tips. For starters, check out our guide on choosing a secure crypto wallet!