What Is An Ethereum DEX?

From a top-level, a decentralized exchange (DEX) is a platform that allows users to trade on a peer-to-peer (P2P) basis, without any form of custodial arrangement over the funds being moved. There is no need for an intermediary, or a team, for the marketplace to function. The DEX, by way of smart contracts, facilitates the movement of money itself as a result of contract functions. Event A, perhaps a buy, then correlates to Function A, funds then being moved from the liquidity pool to the users wallet, and so on.

Therefore, an Ethereum DEX is a platform that facilitates the movement of tokens specifically on the Ethereum blockchain in a decentralized fashion, typically via ERC-20 smart contracts and an Automated Market Maker (AMM) – that allows for trades in a decentralized manner.

But there's a lot more to it than just functionality. What Ethereum DEXs are viable? What are the benefits and disadvantages?

Let's dive in.

Uniswap – The OG DEX

Uniswap has undergone a meteoric rise since the creation of the protocol in November 2018. De         veloped with use of the Solidity coding language, Uniswap is the number one decentralized exchange on Ethereum for transaction volume, regularly surpassing $500M a day in transactions processed on the DEX. The contract is completely open source, meaning other developers can – and have – fork from the existing code, to create similar platforms.

In terms of Total Value Locked (TVL), Uniswap now has over $3 billion worth of assets locked to the protocol, making it the fourth largest DeFi platform by TVL in the space. Liquidity therefore, is abundant on Uniswap, of which has been a big driving force to its engagement levels.

The platform also has a native token, aptly named UNI, acting as a governance token. UNI holders are able to vote on ecosystem development, including Uniswap functionality. The token itself was created with a purpose in mind – to reduce the number of defectors to forked rival SushiSwap. Sushiswap forked Uniswap code, and then launched their own token a month prior to the UNI token launch.

Uniswap has a plethora of choices in terms of tokens available on the platform, and is typically the "go-to" DEX for projects when first launching on Ethereum. The platform leads the way for market share for this reason.

However, Uniswap isn't perfect. The token has taken a slide of late, as has much of crypto – but UNI has been significantly affected. The token trading at around $6.12 at the time of writing, represents a capitulation from highs of $43, as a result of bearish market sentiment – but also brewing regulatory action from the Securities and Exchange Commission (SEC). The SEC are looking to bring exchanges under their purview, and it is rumored Uniswap is at the front of the queue.

Regulatory rhetoric aside, the platform has drawbacks too. The DEX isn't conducive to whale trading, attributing to high levels of price impact and slippage when making large buy or sell orders.

With all of this considered, Uniswap remains a viable, market-leading DEX, however caution should be exercised from both platform and token perspectives.

Integral SIZE – The DEX For Large Trades

While not boasting the same numbers as Uniswap, Integral SIZE still deserves a rightful place as an Ethereum DEX for its potential, and problem solving characteristics alone.

Having launched in March 2021, the platform and its native token (ITGR) are still considered to be at a super early stage – but that hasn't stopped the protocol looking to resolve some of the biggest issues with decentralized exchanges today.

Integral utilizes Time Weighted Average Price (TWAP) when executing orders. In essence, this breaks a large trade into a combination of smaller trades across a 30-minute period. This allows for zero price impact trades, as potential sell pressure is being split into chunks across this time period – as opposed to being executed all  at once.

This helps to keep charts healthy, even when looking to take profits on your favorite token. Integral allows whales to accumulate or exit large positions, without harming the wider ecosystem in chart form. A trader can, on average, lose 2 ETH on a 700 ETH swap for USDC on other decentralized exchanges. At current prices, this could be a $2,600+ loss just for executing a large sell order via an exchange like Uniswap or Sushiswap. With Integral Size, their on-chain TWAP allows traders to avoid these types of losses.

Integral SIZE as a DEX (as well as its token) are still in an early stage of development, so users should conduct their own due diligence accordingly.

SushiSwap – The Uniswap Clone

As alluded to previously, SushiSwap was created specifically to target Uniswap market share. The protocol was developed by pseudonymous developers "Chef Nomi" and "0xMaki" in an effort to piggyback on Uniswap's success, while adding new features to the protocol in an attempt to dethrone the master.

Like its older twin brother, SushiSwap utilizes an AMM to allow for P2P movement of funds, without the need for an intermediary or order book as is seen with centralized exchanges. With AMM's, trades are made with liquidity pools, funds of a particular token which are typically deposited by users, then actioned by smart contracts to provide liquidity for a trade upon request.

In addition to its AMM functionality, SushiSwap has some of its own tricks too. When the protocol was created, liquidity mining was somewhat an innovative, marquee feature, credited at least in part to the native token – SUSHI – and the platform's growth to date.

SushiSwap also allows users to lend and borrow crypto assets through the Kashi dApp, making funds available for a variety of purposes – even leverage trading. Users can also stake their SUSHI at the SushiBar to earn interest on their staked tokens, however SUSHI must of course be held before utilizing.

Like UNI, the SUSHI token has seen capitulation of late, trading at a 50% loss compared to launch price. Traders should heed caution when purchasing any of the aforementioned tokens.

So, Which DEX Is Best?

Each of the decentralized exchanges analyzed has different uses and gratifications. Uniswap and SushiSwap represent large TVL, with a variety of DeFi integrations to help users diversify their portfolios. However, Integral SIZE has a noticeable competitive edge when looking at trade size (hence the name, SIZE). Larger trades are better executed on Integral, whereas smaller retail level trades are best supported across the two larger exchanges. An effective trader should utilize a mixture of these protocols depending on their requirements.