What Is a DEX Coin?
A DEX coin is a governance token that enables the operations of a decentralized exchange. DEX coins have various functions, such as creating shared community ownership, powering the DEX's governance system, incentivizing users to add liquidity to the DEX's pool, etc. Certain exchanges provide further incentives for users to hold their native tokens by creating a staking mechanism that allows holders to stake their DEX coins and earn additional rewards.
DEX platforms are becoming increasingly popular among crypto investors. Some DEXs implement a system similar to a DAO where holders of their DEX coins receive voting rights alongside liquidity provision rewards.
Summary of Important Points
- A DEX coin is a functional governance token that facilitates the functioning of a decentralized exchange.
- DEX coins carry out a wide array of functions on a decentralized exchange, including incentivizing liquidity provision as farmable tokens and powering the DEX's governance system.
- DEX coins work as blockchain-based applications that facilitate the large-scale trading of crypto assets between multiple users.
- Most AMM DEXs have native DEX coin tokens that help encourage liquidity provision on their platform.
- The growing popularity of DEXs and the utility of their native tokens have spurred an interest in the investment viability of DEX coins.
- Investing and purchasing DEX coins provides the investor with exposure to the DEX ecosystem and an opportunity to earn passive rewards by staking their DEX coins.
How Does the DEX Coin Work?
DEX coins function like regular cryptocurrencies. They are blockchain-powered and decentralized. The main difference is that they help maintain and carry out DEX-based functionalities.
Automated market maker decentralized exchanges depend on users to help build their liquidity pools and facilitate the exchange of tokens on their platforms. To achieve this goal, DEXs create different reward-based activities to attract users and encourage them to contribute liquidity to their pool.
DEX coins play an essential role in this process and act as incentivizing tokens helping users contribute liquidity, stake, or participate in yield farming to grow their crypto earnings. They provide a win-win situation for both the users and the DEXs since liquidity powers decentralized trading/swapping of tokens, and those who offer this liquidity get rewarded.
How to Buy a DEX Coin
Interested investors can purchase DEX coins and get some exposure to decentralized exchanges. They are available on regular centralized exchanges and DEXs and can be bought just like the standard cryptocurrencies.
On a traditional exchange, you can buy DEX coins by converting fiat to Bitcoin, USDT, or Ethereum. After this, access any trading pair market and exchange your converted cryptocurrency with the DEX coin.
For instance, if you wish to purchase Pancakeswap's DEX coin, CAKE, you go to a regular exchange and convert fiat to USDT. Then, access the CAKE/USDT market and exchange your USDT for CAKE.
Is a DEX Coin a Good Investment?
Decentralized exchanges are growing in popularity because of their decentralized nature, seamless token swapping, cheaper fees, non-custodial ownership, and enhanced privacy features. Consequently, there is also a growing interest in the DEX coins that help power these platforms.
Due to these fantastic advantages that decentralized exchanges provide over their centralized counterparts, DEX coins are becoming an attractive investment vehicle for many investors around the crypto space.
Aside from the merits of DEXs, DEX coins are also viable investment options because of their utility. Holders of certain DEX coins can stake them and earn additional rewards. They provide a practical incentive for holding them and investing in them. This encourages users to purchase DEX coins with the hope of making a profit on top of their investment from its staking mechanism.
Best DEX Coins to Buy
DEX coins allow individuals to engage in peer-to-peer financial transactions or liquidity pool token swaps powered by smart contracts.
In either case, there is no need for third-party involvement, such as the services provided by banks. This feature alone can disrupt the existing financial order and democratize access to financial services.
The size of the DEX space has grown quite recently. With this in mind, it is important to highlight some of the best DEX coins to buy in 2022.
- RUNE - THORChain
- UNI - Uniswap
- CAKE - Pancakeswap
- LRC - Loopring
- 1INCH - 1inch
- SUSHI - SushiSwap