China's ban on crypto has sent traders piling into decentralized exchanges. Here's a look at what DEX is and what tokens to watch

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China's crypto ban has seen traders flock to decentralized exchanges after it was announced last week.

These peer-to-peer platforms enable parties to trade directly without the need for an intermediary or clearing house.

We will take a look at the operation of these exchanges and determine which coins are the big guns in "DEX".

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Monday's rebound from the last week's slump in crypto trading and mining was a result of China's ban. It's not the major cryptocurrency cryptocurrencies or the hot "altcoins" that have been receiving the most attention, but decentralized exchange tokens (DEX).

Decentralized exchanges do not rely on intermediaries like centralized exchanges. They don't have banks, brokers, clearing houses, or clearinghouses involved. Instead, they provide a peer to peer platform where all parties use smart contracts for execution of trades.

These contracts are mini-programs which run on a blockchain and will execute automatically once certain conditions are met. The ethereum network hosts many decentralized exchanges. It is the largest such blockchain and houses smart contacts, decentralized financial applications, and other protocols.

These are usually cheaper than centralized exchanges like Coinbase or Binance, and users have complete control over their wallets and private key, which allows them to access their crypto tokens.

Uniswap is the largest decentralized exchange by volume, followed by SushiSwap.

"Decentralized exchanges Uniswap, and Sushiswap saw a surge of usage due to China's ban against centralised exchanges. It is easier to use DEX's because they only need a crypto wallet, and there is no KYC [know your customers], so it can be set-up in minutes." Jonas Luethy (junior sales trader at Global Block), said in a newsletter.

A DEX can function in three ways.

The first uses what is known as an "on-chain order book", which lists all orders to buy or sell, sorted by price. This means that every transaction is recorded onto the blockchain. This includes all transactions, not only purchases and sales but also requests to buy or sale. All the information can be stored in one place but it can lead to slower and more expensive transactions.

Off-chain order books do not store orders, but only the final settlement transaction on the blockchain. It is faster but less secure than on the blockchain.

Automated market makers (AMMs) use liquidity pools. The pool is basically made up of a large enough reserve of tokens or pairs of tokens.

The user can simply place the tokens that they want to sell or purchase in the pool. One smart contract will then complete the transaction. This makes it easier to exchange one cryptocurrency for another than an order book.

These are the top three DEX tokens you should be looking out for:

Uniswap, which has a market capitalization in excess of $14 billion, is the largest token. On Monday, the token surged almost 40%. The token is up about 360% this year, at $23.40. With a market capital of more than $1 billion, Sushi is the second largest token. The token has seen a nearly 30% increase in value to $10.70 from its previous Monday high. Monday's gains were as high as 31% for DYDX. GlobalBlock reports that the underlying exchange has experienced a huge influx of users and has recorded higher trading volumes than Coinbase for the first-time. The dydx token was launched about a month ago. It has almost doubled in price to $20.00.