A decentralized exchange (DEX) is an online type of exchange that works on a blockchain network rather than on a central authority. This means that DEXs are decentralized, which means that there is no unique entity controlling them, and users have complete control over their accounts and transactions.
Here is how a decentralized exchange works:
- User creation : A user creates an account on the platform of their choice.
- Deposit fund
: The User deposits funds in his account, which can be in any cryptocurrency or type of assets supported by the DEX.
- Correspondence pairs : A liquidity pool is created, where several users deposit and remove funds to correspond to the transactions of each other.
- Command book : The exchange maintains a command book which lists all the commands available for each asset. When a user plans an order to buy or sell an asset, his request is equal to the request for correspondence from another user on the order book.
- Financing markets : The liquidity pool provides funding for users to exchange assets at favorable prices. When a merchant wants to buy an asset, the supplier of liquidity provides funds from the swimming pool until the trade is established.
- Exchange costs : The exchange receives the costs of transactions, which are distributed among all the parties involved in the transaction.
The Dex offer several advantages compared to traditional exchanges:
- Lower costs : DEXs often have lower costs compared to centralized exchanges, because they do not need to pay for intermediaries or maintain a central authority.
- higher liquidity : Dex can manage more transactions per second due to their decentralized nature and use of several liquidity suppliers.
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Examples of popular decentralized exchanges include:
- Uniswap (V2) and
Uniswap (V3) : two of the best known Dexs which allow users to exchange assets directly.
- Sushiiswap : A popular dex which supports a wide range of cryptocurrencies, including Ethereum, Binance Coin, and more.
- CURVE DAO : A decentralized exchange (DEX) built on the Ethereum blockchain, known for its high liquidity and low costs.
When you choose a decentralized exchange, consider factors such as:
- Liquidity : Make sure that the DEX has sufficient liquidity to support your transactions.
- Frais : Understand the costs associated with trading on the platform.
- Safety
: Check the safety measures in place to protect user assets.
- User experience : Look for a user -friendly interface and quick execution speeds.
By understanding the operation of decentralized exchanges, you can make informed decisions on the DEX best suited to your business needs.