How to Buy Crypto on a Decentralized Exchange
Buying crypto on a decentralized exchange isn’t a complicated process, especially if you’ve used centralized exchanges in the past. But if you’d like a step-by-step guide on how to make your first purchase on a DEX, read on here.
Jul 14 2022 | ArticleHow to Buy Crypto on a Decentralized Exchange
Decentralized exchange (DEX) platforms have offered crypto investors the opportunity to exchange digital assets smoothly and autonomously without intermediaries when completing transactions. In the past, investors relied on third-party wallets to complete transactions. Unfortunately, these intermediary accounts were opaque and lacked transparency.
Now it is quite easy to complete a transaction because a DEX gives you full control over your funds; however, it is important to understand what a decentralized exchange is and how it works before you start using it. This article will dive into how to buy crypto on a decentralized exchange platform.
#What Is a Decentralized Exchange?
A decentralized exchange is a crypto exchange platform that allows users to transact without intermediary accounts. A DEX platform uses smart contracts to facilitate transactions, giving users full control. DEXs are alternatives to centralized exchanges that rely on centralized institutions like banks and brokers to facilitate crypto exchanges.
Unfortunately, most of these institutions are involved in profit-making ventures. Therefore, they charge high fees for their services. A decentralized exchange platform eliminates this hassle by allowing users to transact directly from their self-hosted crypto wallets through smart contracts.
Many DEXs are built directly on the leading blockchain networks like Ethereum because they are built on layer-one protocols. Because DEX users are responsible for their funds and use smart contracts, they are only required to pay a transaction fee and a trading fee. But why does the user have to pay these fees if decentralized exchanges are really decentralized? Transaction and trading fees are essential for rewarding miners or validators who work tirelessly to protect blockchain networks from attacks and confirm transactions.
#How to Buy Crypto On a DEX
First, note that different DEXs come in different designs and functionalities, depending on their intended functions and objectives. The functionality of your DEX also depends on the type of Web3 development platform you use to create your marketplace. So, choose a developer that meets all your crypto investment and exchange needs. Fortunately, there are numerous Web3 developers that you can use, including the OpenDEX Platform—an open-source platform that enables crypto investors and developers to create their own DEXs.
Also, note that some cryptocurrencies can only be purchased using other cryptocurrencies on DEXs. For instance, if your DEX is based on the Ethereum network, you must first buy Ethereum (ETH) to use it to buy the decentralized crypto assets you wish to buy. This transaction requires a self-hosted wallet. Here are the simple steps you need to follow when buying crypto on a DEX platform.
Downloading Your Self-Custody Wallet
You can find many reliable self-custody wallets on the internet or Google Play Store. These wallets come in mobile apps or browser extensions. So, if it is an app, download it from a safe source.
Giving Your Wallet a Username
When you set up your crypto wallet, you will be required to give it a name to make it easier for other crypto traders to send you funds. Although you can hide your username, you will need to set up your crypto wallet.
Storing Your Recovery or Security Phrase
Most digital wallets will provide you with a secret security or recovery phrase that you can use to access your wallet or recover your account when you forget your password. This is usually a twelve-digit phrase. No one else should know this. So, ensure it is securely stored away from the reach of other people.
Buying Ethereum
Use your wallet to buy ETH. The process of transferring ETH to your self-custody wallet is simple, whether you are using a mobile app or a browser extension wallet. If your account is linked to the wallet, you can transfer the funds directly.
Buying Crypto Tokens
If you are using a mobile app wallet, you can buy the crypto tokens you need right in the app. You just tap on the Trade tab and swap ETH for the token. Tap on the “Choose Coin” tab and choose the crypto token you wish to buy. Then, choose the amount of ETH you want to exchange. Confirm the order and follow the instructions on the screen to complete the transaction.