There are two types of cryptocurrency exchanges, centralized exchanges and decentralized exchanges. Currently, centralized exchanges maintain a significant dominance in the trading market. However, the development of decentralized exchanges cannot be ignored, commonly known as DEX, the full name of which is Decentralized exchange. The main feature is that most of the exchanges that do not have KYC, do not need to register and log in, and provide transaction exchange services immediately after use.
As a blockchain-based exchange, DEX does not store user funds and personal data on servers, but only serves as an infrastructure to match buyers and sellers who wish to buy and sell digital assets. With the help of a matching engine, this transaction happens directly between participants (peer-to-peer). Therefore, users of decentralized exchanges must keep their public keys, private keys, and mnemonics. Once lost, the assets cannot be recovered.
There are two types of DEX. The first is an order book that enables decentralized exchanges, such as: MetaTdex. The second type of DEX is a liquidity pool-based exchange that completes transactions through automated market makers. The algorithm behind a liquidity pool-based DEX is called an Automated Market Maker (AMM). For example, Uniswap uses an automatic market maker model.
The DEX decentralized exchange is an important part of the DeFi ecosystem, and the role of the DeFi ecosystem is that the centralized exchange (CEX) is equivalent to the role of the entire cryptocurrency market. Although DEX has the characteristics of complete decentralization, transparency and openness, it also has the disadvantages of low transaction efficiency and small user scale.
At present, the more commonly used Uniswap, MetaTdex, PancakeSwap, etc.