Have you ever thought of trading Bitcoins via decentralized exchanges (DEX) or considered whether better options exist over centralized exchanges (CEX)? There certainly are! In this write-up, you’ll learn all you need to know.
What is a Decentralized Cryptocurrency Exchange?
Decentralized cryptocurrency exchanges came as an answer to people’s need to exchange Bitcoin and other cryptocurrencies without having to hand over control to a third party.
Why Should You Trade Bitcoin on a Decentralized Exchange?
There are many benefits in trading Bitcoin via Decentralized Exchanges. Some of them include:
Less Risky to Trade on DEX:
A DEX is less prone to hacks since the platform has no central authority and does not hold the customer's funds.
DEXs do not go through the Know Your Customer (KYC) or Anti Money Laundering (AML) procedures. Most DEXs do not also make it mandatory for users to create an account - all that is required is a wallet address to start trading.
Potential for Funds to be Seized is Low:
DEXs are non-regulated exchanges that are hosted on decentralized servers. They cannot fold easily as a result of regulatory concerns since they are not based in a physical office or location.
How Does a Decentralized Exchange Work?
A DEX is a distributed order book that enables two parties to transact anonymously. The participating individuals rely on a smart contract to facilitate their trade, and as such, no third parties are serving as an intermediary.
To sell/buy crypto-asset on a DEX, you will have to go through the following steps:
● Sign in to the DEX using your wallet address.
● Create a buy or sell request.
● The smart contract gets executed, and the token is transferred to/from your wallet.
● You can opt to disconnect your wallet from the DEX.
A more complex model of operation of DEX involves:
● A trader places an order on the DEX to exchange crypto asset.
● The trader enters the unit of the virtual asset and states both the price and the bidding time.
● The selling order is then submitted
● Potential buyers surf the inter-blockchain order-book
● They submit bids on the amount of crypto they'll like to purchase and the price they are willing to pay for each unit
● At the expiration of the time set by the seller, the bids are reviewed, buy and sell orders paired, and then executed by atomic swaps.
How Do I Trade Bitcoin via Decentralized Exchanges?
Trading Bitcoin via Decentralized Exchanges in 2019 is easy. You can do that on any of the platforms below:
Here’s a step-by-step procedure. In this guide, we’ll be using the Waves platform to trade Bitcoin for Ethereum:
Step 1: Choose an Easy to Access User Interface:
Access the Waves Platform and download the Waves application for your device. You can also use the web interface instead – which is what we are using in this guide.
Step 2: Create or Import Account:
You can import an existing wallet (Ledger wallet, seed phrase, private key, etc.) holding your Bitcoin to Waves or create a new account.
To create an account:
● Choose your desired avatar.
● Copy your account’s address and save it.
● Opt to keep the details of the account you've created on your computer.
● Click on 'Continue'
● Enter an 'Account Name'
● Choose a strong 'Password' and confirm the password
● Click on 'Continue'
● Back up your seed phrase to ensure you can still access your account if you forget your password
● Click on 'Backup Now'
● Agree to the terms and conditions.
● Copy the 15 phrases in the order they have been displayed
● Next, confirm the key phrases
● Finally, accept the terms and conditions, then select 'Confirm and Begin'
For a new account, you need to fund it with Bitcoin to trade it with other assets such as ETH, XMR, USD, EUR, etc. allowed on Waves.
To do this:
● At the lower section of the homepage, click on 'Receive'
● Copy your Bitcoin address or scan its QR code
● Transfer the amount of BTC you want to transact to your Waves wallet (Minimum is 0.001 BTC ($10.24)). Having funded your wallet, you can skip to Step three of this tutorial. Meanwhile, you can also import a wallet to Waves instead of creating a new one. We'll like to believe you own a portfolio with Bitcoin stored in it. Hence,
● Click on 'Import accounts'
● Choose the wallet whose seed or private key you want to import
● If you're not using the Ledger hardware wallet, select 'Seed or Key'
● Either access your wallet with the seed phrase or click on the private key section
● Finally, click on 'Continue'
● If the seed phrase or private key matches with an existing one, a Bitcoin wallet will be imported to Waves.
● However, you may need to enter new account details such as username and
password to identify your Waves account
Step 3: Trade Your Bitcoin for other cryptocurrencies on Waves:
It's time to trade your Bitcoin for other crypto assets on the platform.
To do this:
● Click on the 'Exchange' menu.
● Select the 'BTC' market to check for assets you can swap to:
● For instance, ETH/BTC
● In this case, you can either buy ETH using your BTC or sell ETH for BTC
● To buy ETH, set the order at the 'Buy' zone.
● Enter the price you want to buy your ETH
● Enter the amount in ETH which you wish to transact, and the amount in BTC will be displayed automatically.
● Set the transaction expiration to your wish.
● Finally, click on 'Buy ETH'
● Once your transaction has been processed, your wallet will be funded with the ETH equivalent of the BTC sold.
These are the simple steps on how to trade Bitcoin on decentralized exchanges easily in 2019. There is a wide range of assets, which means there is no limitation to your trading.