Decentralized exchanges (DEXs) are important components of the decentralized finance (DeFi) ecosystem, which enable users to trade cryptocurrencies in a direct manner without having to rely on any intermediaries. It is due to the platform of Decentralized Exchanges including Uniswap, using blockchain and smart contracts; thereby providing a chance of making these transactions much secure, and more transparent, and most importantly, they do not require any permissions.
How DEX Works -
This model is distinguished by the absence of middlemen who act as custodians in centralized exchanges; it allows the DEX instead to connect buyers and sellers directly in a peer-to-peer trade. In the principal instance of Uniswap, the ADX is based on an Automated Market Maker (AMM) model. There are no order books in Uniswap; rather, there is some provision of liquidity courtesy of the users depositing pairs of tokens in Liquidity Pools. These pools facilitate instant trading at a price calculated by a mathematical formula, which allows for liquidity without having to rely on some form of centralized management.
PROS -
DEXs are so transparent and safer than what you are acquainted with for your trade. DEXes such as Uniswap are designed so that every transaction is recorded on the blockchain, peppering the relevance to your own self the rest of the time. Good users lose control of their funds in the event of hacking or theft, which are very common across centralized platforms. They are permissionless; in the sense that having a wallet that is compatible with it allows anyone to make transactions without having to register or verify identity, and if, for example, someone dislikes CEXs, DEXs also support a greater variety in tokens, making access to even newly released assets on CEXs possible.
Challenges and Downsides -
Even though DEXs have their share of challenges, the highest gas fees on Ethereum can add up the cost of trading during times with clogged networks. Dangers like impermanent loss for liquidity providers and exposure bait to scams or poorly devised tokens are included in using DEX.
In fact, DEXs like Uniswap are the new normal in trading because although decentralized, it is much more innovative and promotes increased reach to inclusivity of financial systems.
Thanks
~ Nesaty
I think Decentralize Among exchanges, those on the Ethereum network are the worst because they charge a lot of fees.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit
It is a great article of Decentralized Exchanges (DEXs) like Uniswap.
Downvoting a post can decrease pending rewards and make it less visible. Common reasons:
Submit