Pros and cons of DEXs & OTC trading explained.
The benefits of decentralized crypto exchange (DEX)
There seems to be no exit from an overarching financial framework shaped by banking institutions that make a fortune from your daily trades in centralized finance.
Whether a major bank or a dominant stock exchange, it requests surcharges of different forms to execute transactions, including but not limited to penalties for late submissions, fiat transfers, and international remittances fees. And as trusted intermediaries that monitor your transactions, centralized banks may be less secure than what you assumed. Personal data breaches happen when a banking service provider shares your data with their partners or affiliates. Also, putting your money into the hands of a third party raises concerns about money embezzlement in a system open to manipulation.
To tackle the surcharges, data breaches, and security issues haunting centralized finance, decentralized crypto exchanges (DEXs) propose a permissionless trading model that eliminates intermediaries. Running on automated market maker (AMM) protocols, DEXs automatically match sellers and buyers who trade in encrypted wallet addresses for privacy’s sake. And transaction fees in crypto are given to liquidity providers for their assistance in processing transactions and keeping AMM DEXs sustainable. If centralized banks embody monetary economics that favors the monolith of financial giants, DEXs pave the road toward an alternative present where machines free your digital assets from gatekeepers’ control. You can trade anytime, anywhere, regardless of banking hours, in absolute privacy.
Our crypto exchange BloctoSwap is the first AMM DEX on the Flow blockchain, which can be your entrance to the alternative present of crypto freedom which millions of blockchain users already benefit from. Although decentralized finance (DeFi) is still in the beginning stages of its evolution, our exchange lets you experience financial liberation only a few clicks away.
DEXs vs. OTC trading
But what about over-the-counter (OTC) trading? Isn’t THAT a better way to access financial freedom with no intermediaries involved?
Indeed, if you have had some experience in crypto transactions, you must have heard of OTC in crypto, another trading avenue in DeFi. Instead of relying on dealers in centralized exchanges, both DEX users and OTC traders have complete control over their transactions. Nevertheless, while the former leverages AMM protocols to get matched, the latter directly trades assets in places off formal crypto exchanges or markets. And since OTC trading is gaining popularity among big traders, whose large orders might be disruptive if placed on open markets, main crypto exchanges like Coinbase and Kraken launched OTC desks for them to access deeper liquidity.
Although OTC desks meet the demand of the “whales” (substantial digital asset holders in crypto jargon), OTC trading poses potential risks of fraud. Undoubtedly, security threats are considerably reduced on the OTC desks of reputable crypto exchanges since trusted counterparties must clear strict KYC and AML policies and go through the whole trading process with service agents. However, OTC trading generally remains riskier than DEXs since it is unprotected by the smart contract mechanism that avoids non-fulfillment of deals and scams of various kinds made by potential sellers & buyers. In short, OTC trading is preferable and necessary for whales, but DEXs are probably a better choice for shrimps who do not have an established personal network or access to prime OTC desks on esteemed DeFi platforms.
Token Swap on BloctoSwap
BloctoSwap—the first DEX on the Flow blockchain—allows you to effortlessly swap one crypto with another. Now supporting the trades between tUSDT, BLT, FLOW, REVV, STARLY, FUSD, and USDC, BloctoSwap facilitates your trades and investments! Find the step-by-step guide and the short video below to start swapping your tokens:
Step 1: If you are logging in with a computer, go straight to https://swap.blocto.app. Otherwise, open Blocto App and go to “Discover” at the bottom. Find “BloctoSwap” on the page and sign in with your Blocto email account (Flow wallet).
Step 2: Click on “Swap.”
Step 3: Choose a trading pair (Flow) and fill in the amount of the crypto you would like to exchange for another.
Step 4: Check the transaction info and adjust your slippage tolerance by the Settings icon (the gear icon) if needed.
Step 5: Click “SWAP.” Check the transaction details and click “CONFIRM SWAP” to submit the transaction.
Step 6: You’re all set!
- Slippage tolerance refers to the pricing difference between the price at the confirmation and the price you are willing to accept in token swapping. It is set as a percentage of the total swap value, and if the price changes unfavorably by more than the set percentage, your transaction will revert.
- You will pay a 0.3% transaction fee (same as Uniswap) to the liquidity provider per transaction.
If you want to become a liquidity provider (LP) and earn liquidity fees, you can deposit a portion of your holdings to BloctoSwap! Find out how to deposit your tokens into liquidity pools now: