What's DEX
Centralized vs. Decentralized Exchanges (DEX)
Cryptocurrency exchanges can be categorized into two main types:
Centralized Exchanges (CEX)
Decentralized Exchanges (DEX)
Currently, CEX dominates the market, but the growth of DEX cannot be overlooked.
What is a DEX?
A Decentralized Exchange (DEX) is a blockchain-based, non-custodial platform that enables peer-to-peer trading of digital assets without requiring registration, login, or KYC (Know Your Customer).
Key Features of DEX:
Does not store user funds or personal data.
Functions as a matching engine to connect buyers and sellers.
Transactions occur directly between participants (peer-to-peer).
Users are responsible for managing their own private keys and mnemonic phrases.
Note: If private keys or mnemonic phrases are lost, assets cannot be recovered.
Types of DEX
Order-Based DEX:
Uses a bidding model to match buyers and sellers.
Liquidity Pool-Based DEX:
Utilizes Automated Market Makers (AMMs) to facilitate trading.
Example: Uniswap, which allows users to provide liquidity and earn fees from trading activity.
DEX in the DeFi Ecosystem
DEX plays a vital role in the decentralized finance (DeFi) ecosystem, offering a decentralized, transparent, and open trading experience.
Advantages of DEX:
Fully decentralized and transparent.
No intermediaries or centralized control.
Challenges of DEX:
Lower efficiency compared to CEX.
Smaller user base and liquidity.
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