Decentralized Exchanges(DEX)

In full, DEX stands for Decentralized Exchange.

In recent years, there have been many incidents of centralized exchanges being hacked. When a centralized platform is attacked, user assets on the platform would suffer a certain degree of loss, leading to various instabilities.

DEX are exchanges developed based on smart contracts. The user's funds and personal data are not stored on a centralized server. Instead, the buyers and sellers of digital assets are matched through smart contracts to conduct peer-to-peer transactions.

DEX allows traders to exchange by staking to provide liquidity. When a trader wants to trade, he only sees the asset price and does not see the commission order. Granted that the price is right, an exchange can be carried out without the need for centralization. The varied pricings and complex transaction steps of the DEX’s buy-sell orders clearly informs buyers and sellers of the willing price.

On the DEX, it first allows liquidity providers (LPs) to pledge cryptocurrency to the liquidity pool to generate a price, which is converted into a willing price for both buy-sell parties, thus allowing for faster completion of transactions and currency liquidity.

Compared with centralized exchanges, DEXs are safer, more convenient and DEXs have greater control over their assets to circumvent the risk of hacker attacks.

At present, the total volume locked for the entire DEX field has reached nearby US$63 billion, establishing DEX as one of the most important areas in the field of DeFi.

Advantages of DEXs:

Unlike in centralized exchanges, in DEX, there is no need to register a platform account as users may directly use third-party wallets to participate in DEX transactions. There is also no need to submit any cumbersome identity verifications or KYC (Know-Your-Customer) processes, thus achieving high privacy.

When users want to exchange tokens, they don’t need to deposit funds in the platform’s designated wallet address, but are able to directly facilitate transfers through QR scanning using third-party wallets to exchange tokens. Without any centralized management in DEXs, the entire exchange process is governed by smart contracts to protect the user's asset control and personal privacy without the risk of data leakage.