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Perpetuals trading has become increasingly popular in recent times, as a way for competent traders and crypto enthusiasts to profit, even in a bear market. This has resulted in decentralized exchanges (Perps DEXs) gaining a lot of attention over the last year. The collapse of FTX expedited the rush to DEXs as confidence in centralized entities dwindled.
The market for perpetuals is enormous. In the previous year, daily traded volume on CEXs was between $100 and $200 billion, with the daily volume for DEXs ranging from $200 million to $400 million. Due to the perceptions that DEXs are less user-friendly, they fall behind CEXs, but the tides are turning as users favor security. Increasingly we are seeing an improved user-experience on DEXs to rival the CEX standard and further encourage the migration to decentralized finance.
Here are 6 of the top Perps DEXs to watch in 2023:
Available on both Polygon and Arbitrum, the Gains Network is one of the more unique perpetual exchanges. Gains Network uses synthetic leverage to allow for high-leveraged trades on almost any asset class.
Pros:
- Highest decentralized leverage (up to 1000x)
- More than 100 trading pairs featuring different assets from different asset classes.
- GNS utilizes NFTs to provide approval for running bots on the platform. These NFTs also increase the earning potential for stakers.
- The GNS supply is currently deflating due to over-collateralization of the gDAI vault.
- Relatively low trading fees.
- Lucrative referral program.
Cons:
- Lower liquidity available to trade perpetuals.
- Lower amounts of fees are distributed to stakers and liquidity providers. – Lower volume compared to other perpetual exchanges.
Foxify is a decentralized trading platform offering unique peer-to-peer options (traders can sell options) and perps trading. Built on Arbitrum, Foxify is launching in partnership with Tyson Fury. Foxify’s OptiTrade technology provides the same user-friendly experience as a CEX, breaking down the barrier between centralized and decentralized exchanges to allow users to experience the best of both worlds.
Pros:
- Innovative wallet creation solutions – sign up through an email, just like a CEX.
- Foxify allows traders to sell options; enabling peer-to-peer trading as either a maker or taker.
- Leveraged Liquidity: users can earn extra yield on top of their already yield-generating LP tokens.
- Generous Affiliate Program.
- Best Tokenomics among all exchanges, with a 56.25 million token max supply with some vesting.
- Offers on-ramp and off-ramp, unlike other exchanges.
- Paper trading platform & academy to allow users to familiarize themselves with the platform.
Cons:
- Investors are unable to value Foxify based on liquidity depth or volume as Foxify has still yet to launch.
- Foxify will need time to find its footing in the market.
Founded in 2017, dYdX is a layer-2 decentralized exchange that supports perpetuals, margin trading and spot trading, as well as lending and borrowing. dYdX runs on smart contracts on the Ethereum blockchain, allowing the dYdX blockchain to benefit from the security of Ethereum while also facilitating quick and low-cost trades.
Pros:
- Currently has the closest user experience to a centralized exchange.
- Trades on their own Layer 2, allowing for gasless transactions.
- Cheapest maker and taker (trading fees) among all decentralized perpetual exchanges.
- $100k worth of free trades per month per user.
- Traders are distributed $dYdX tokens for using the platform.
- Earn up to 40% of trading fees through their lucrative affiliate program.
- Deepest liquidity for perpetual trading.
- Largest volume among all decentralized perpetual exchanges.
Cons:
- dYdX stakers do not directly earn from the success of the protocol.
- After the cap of dYdX is hit, dYdX will have a 2% inflation rate per year, diluting holder supply over time.
GMX is the current largest decentralized perpetual exchange on the Arbitrum Layer 2, allowing users to trade on either Arbitrum or Avalanche. More than three-quarters of the trading activity transpires on Arbitrum, with Avalanche providing a much lower volume of trade. Trading liquidity is provided by GLP, a crypto ETF-like asset native to GMX.
Pros:
- 100% of fees are distributed to stakers and Liquidity providers.
- Very deep liquidity for perpetuals trading.
- GMX is available on 2 popular blockchains.
- High volume and collected trading fees among all decentralized perpetual exchanges.
Cons:
- Extremely limited amount of available trading pairs.
- Does not have notable trading innovations that traders can take advantage of.
Vela Exchange is another perpetual exchange that is launching on Arbitrum. They have just completed a successful Beta, facilitating 5.5 billion dollars in volume. Backed by VCs such as Magnus Capital and Jade Protocol, Vela provides a decentralized alternative for crypto and forex leverage trading.
Pros:
- Good user experience.
- Users can trade forex as well as cryptocurrencies. Cons:
- Investors are unable to value Vela based on liquidity depth or volume as Vela has still yet to launch.
- A lot of the features promised in the whitepaper have yet to be implemented.
- Relatively high fees compared to other platforms. – Weaker referral program.
Level Finance is a BSC exchange that uses two tokens, LVL (the utility token) and LGO (the governance token). Level uses auctions to sell LVL tokens to deepen Protocol-owned liquidity, allowing for a more secure trading experience.
Pros:
- Investors can choose their risk tolerance when providing liquidity for perpetual trades through their risk management LP system.
- Good tokenomics with a max supply of 50 million tokens.
- Loyalty program that rewards traders who trade on the platform.
- DAO is very involved in voting and decision-making.
- Decent trade volume and fees collected.
Cons:
- Low trading liquidity.
- Very limited trading pairs are offered.
- Very few tokens are in circulation which might lead to token dilution further down the line.
Perps DEXs are still in their infancy and competition is just heating up. As of right now, the experience of trading on DEXs have been lackluster. The growing competition in the market will surely push each DEX to create robust user experiences and unique features that will bring mass adoption to blockchain technology, and DeFi in particular.
Disclaimer: DeFi is an emerging strategy that comes with multiple risks. Diversity is essential in reducing this risk. Only invest with money you can afford to lose. This article is for informational purposes only and not financial advice, always do your own research.
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