If you have ever considered purchasing cryptocurrencies, you probably noticed the large number and different types of cryptocurrency exchanges that exist out there. Through the maze of new companies popping up daily, it can sometimes be difficult to keep the overview. In this article, we will guide you through the process of purchasing tokens on IDEX, the largest decentralized exchange by volume at the time of writing. We have also prepared a tutorial video of the whole process that you can watch below. However, before we dive into the details of purchasing tokens on this particular exchange, let us start with a brief description of the main types of cryptocurrency exchanges.
Centralized versus decentralized exchanges
When it comes to trading digital currencies, we most commonly distinguish between centralized and decentralized exchanges. In real life, these categories are somewhat blurry and you will find many exchanges which are somewhere in between. Nevertheless, it is important to note the differences between the two ends of the spectrum:
- Firstly, centralized exchanges allow you to buy cryptocurrencies using fiat money, such as USD. On decentralized exchanges this is usually not possible.
- Centralized exchanges allow transactions between different protocols. This means that you can, for example, swap your bitcoin (BTC) for ether (ETH) or vice versa. On a decentralized exchange you can only trade tokens which run on the same protocol.
- Centralized exchanges are typically run by companies. These companies decide who gets access to the exchange and under what conditions. In recent months, some centralized exchanges have made headlines with the high listing fees that they charge for tokens to be listed on their exchange. Decentralized exchanges are also commonly maintained by a team of professional developers but usually listing requests can be submitted free of charge.
- The last, and maybe most important point to consider when you ask yourself where to purchase your token is security. When you open an account on a centralized exchange, the company which runs the exchange usually holds your funds. This means that if the exchange goes out of business, is shut down or runs into other issues, your funds may be lost. On a decentralized exchange, you send your funds to the smart contract of the exchange. The code of the smart contract is public and with some technical knowledge, you can check if and how the smart contract allows you to withdraw your funds in case the website of the exchange – which serves as an interface to the smart contract – goes down.
Once you decided which type of exchange best suits your needs, there is a large number of options to select from in both categories. In this blog post, we will take a closer look at IDEX, which currently is the largest decentralized exchange for ER20 tokens in terms of volume. You can access it here: idex.market.
Unlocking your wallet for IDEX
In order to trade on IDEX you first have to unlock your wallet. There are a few options to do that. You can either restore a keystore file, use your private key or connect a software or a hardware wallet. When choosing between these options, you should keep in mind that for safety reasons, you don’t want your private key to touch the internet, so uploading it here is not a great option. Your best options are to either use a software or a hardware wallet. We will focus on accessing IDEX via a software wallet, more specifically MetaMask. This is of course only one of the many possible choices and it is your own responsibility to choose a provider you trust.
If you don’t have MetaMask yet, you need to install a browser extension. Search for the Google Chrome “MetaMask extension“ and add it to your browser. Click on the icon in your browser and follow the prompts to set up MetaMask. Since this is fairly easy, we won’t go through the individual steps here. Once you are done setting up the software wallet, you can either purchase ETH against fiat on a centralized exchange or you can send the ETH you already have to your MetaMask wallet. Once your ETH has arrived in your MetaMask wallet, you proceed to unlocking it for IDEX. To do this, click on the unlock wallet tab on the IDEX website. Then choose the software wallet option and click on unlock software wallet.
Deposit to the IDEX smart contract
Now you are logged into IDEX with your Ether address. The next step is to deposit from your software wallet to the IDEX smart contract. This is possible under the Balances tab in the navigation.
- Filter the list with the value Ether
- Click on deposit in the actions row of Ether
- Choose the amount you want to deposit
- Adjust the gas price. The higher you set the gas price, the faster your transaction will usually go through. Transaction speed is usually not a problem unless the network experiences congestion, in which case you have to set the gas price higher for your transaction to make it into the next block. You can check the top of the website for the currently recommended gas price based on the real time activity on the network.
- Now click on deposit and confirm
- Your MetaMask will ask you to sign the transaction
After this set up, we’re now ready to go check out IDEX for the token we would like to buy. Just enter the ticker symbol in the search box. For our example, we would like to buy some VLD token. VLD token support the personal data marketplace ecosystem of the VETRI application. The VETRI marketplace enables you to part take in the personal data economy, selling your anonymized data to researchers, marketers and product developers and getting rewarded for it.
Buy an ERC20 token
To purchase the token, we type VLD into the search bar and can now see the chart, the buy and sell option, orderbook and history of trades like on any other exchange. To place an order, we need to write the price we want to pay per VLD token as well as the amount of VLD tokens we would like to purchase in total.
You can choose between market and limit orders. Limit orders will ensure that the transaction is only executed at or below the price you indicated per token. Market orders will buy you any amount of VLD you can get for your ETH at the current market rate.
When you are happy with the transaction parameters you have set, click “buy”. MetaMask will prompt you to confirm the transaction. Now your transaction is added to the order book. Should you change your mind, you can delete your transaction any time as long as it hasn’t been executed.
Once it has been executed, you will be able to see your VLDs in the balance of tokens. You can either withdraw them to your MetaMask or continue trading with them on the exchange.
That’s it. Pretty easy right? We hope this little tutorial was useful to you and wish you a lot of fun exploring the universe of decentralized exchanges.