DeFi is an important infrastructure and application in the Web3 field, and DEX is a key driving force for the entire DeFi ecosystem to move forward. DEX has laid the foundation for the booming development of the DeFi field, providing users with an environment where they can trade assets safely and transparently without trusting a third party.
This article will explore the core role of DEX in the DeFi ecosystem and how they work together to build a more open, fair and innovative financial world. As DeFi continues to expand, the role of DEX becomes more important. They not only promote the free flow of assets, but also promote a new wave of innovation in financial services, providing unprecedented opportunities for individuals and institutions outside the traditional financial system.
Decentralized exchange (DEX) is a platform based on blockchain technology that allows users to directly and securely exchange digital currencies and other digital assets without intermediaries. Unlike traditional centralized exchanges (CEX), DEX does not store users' funds, private keys or personal information, but automatically executes transactions through smart contracts, thereby better managing and controlling the security risks faced in transactions.
Decentralization: DEX operations do not rely on any centrally controlled entity, and transactions occur directly between users, which improves the transparency and security of transactions.
User-controlled assets: Users have full control over their own cryptocurrencies and private keys, and do not need to store assets in exchanges, reducing the risk of funds being stolen.
Anonymity: Most DEXs do not require extensive identity verification, and users can enjoy a higher degree of privacy.
Global accessibility: As long as there is an Internet connection, anyone can access DEX without worrying about issues such as geographical location or account freezes.
Innovative trading mechanisms: DEX often adopts innovative mechanisms such as automated market makers (AMMs), where users can become liquidity providers, participate in the supply and demand of the market, and receive transaction fees as rewards.
Although DEX offers many advantages, there are also some challenges, such as relatively low liquidity, transaction speeds that may not be as fast as centralized exchanges, and differences in user experience. However, with the advancement of technology and the maturity of the cryptocurrency market, DEX is becoming more and more popular, making important contributions to the development of the decentralized finance (DeFi) field.
Generally speaking, DEX can be divided into three types according to different trading modes: one is based on the Orderbook order book mode, where the custody and transaction matching are completed off-chain, in order to solve the problems of slow on-chain transactions, insufficient depth, large slippage, and impermanent loss. For example, Loopring (Loopring Protocol) and 0x adopt this mode; the second is based on the AMM automatic market maker mode, which supports instant human-machine trading. Anyone can be a market maker, which greatly increases the depth of transactions and solves the drawbacks of on-chain transactions. It is also a widely used mode at present. The third is the peer-to-pool mode, such as Kine Protocol.
Among them, the AMM automatic market maker mode needs to be introduced in particular. After years of development and evolution, the AMM automatic market maker mode has been proven to be one of the most influential DeFi innovations. If further subdivided, the AMM automatic market maker model can also be divided into constant product market makers (CPMM), constant sum market makers (CSMM), constant average market makers (CMMM) and advanced hybrid constant function market makers (CFMM). Today, we will not go into detail here, but focus on the macro-level economic model to discuss how it works.
The AMM automatic market maker model fundamentally changes the way users trade crypto assets. Unlike the traditional order book trading model, both parties of the AMM transaction interact with the on-chain liquidity asset pool. The liquidity pool allows users to seamlessly switch between crypto assets on the chain in a completely decentralized and non-custodial manner. Liquidity providers earn passive income through transaction fees, which are calculated based on the percentage of their contribution to the asset pool.
KineProtocol point-to-pot: Market makers do not need to make depth, all market maker funds are in the liquidity pool, providing unlimited depth, market orders can be directly traded with market makers at a very low markout, and the cost of market makers is low.
The technical advantages of the Kine Protocol trading platform make it unique in decentralized exchanges!
1. The perpetual contract of the Kine Protocol trading platform adopts a peer-to-pool trading liquidity mechanism, which makes the liquidity of the decentralized derivatives platform surpass that of the centralized trading platform and provides users with a better trading experience.
2. The high-performance oracle of the Kine Protocol trading platform is combined with the liquidity pool, which gives it an advantage comparable to that of centralized exchanges in terms of operation and leverage multiples.
3. The trading engine of the Kine Protocol trading platform is separated from the clearing and settlement engine, which provides users with the advantages of gas fee-free, millisecond-level transaction performance and low-cost transactions, and improves transaction efficiency.
4. The signature authorization encryption mechanism of the Kine Protocol exchange enables it to interact through the mobile app, which improves the convenience of users.
Kine Protocol is based on the concept of establishing user asset security and smooth transactions, and is constantly innovating and precipitating, and is committed to becoming one of the most authoritative trading platforms for decentralized derivatives.
Explore the critical differences between Centralized and Decentralized Exchanges (CEX vs DEX) and understand which crypto trading platform suits your needs in our comprehensive guide.
MiyukiHackers steal millions in cryptocurrencies, converting them into Ethereum, with suspected ties to the Lazarus Group, amidst ongoing security concerns.
KikyoIn a disconcerting development, decentralized exchanges Velodrome and Aerodrome faced a second consecutive cyberattack. Exploiting domain vulnerabilities, the assailants targeted the platforms, prompting swift responses and reassurances from both exchanges. Despite their shared vulnerability, each exchange, managed by Porkbun, maintains its independence and dominance in Total Value Locked (TVL) within its respective network. The full extent of the impact on user assets remains unclear, with estimates suggesting over $100,000 in potential losses.
Xu LinA simple guidance manual for crypto newcomers to get onto DeFi as quickly as possible. Let’s kickstart your DeFi journey from the easiest level - decentralised exchange (DEX).
Nell
NulltxNulltxTo avoid front-running, split the transaction into multiple smaller transactions, match auctions regularly, or reduce slippage.
CointelegraphThe “top-tier” exchanges, as ranked in a report by CryptoCompare, increased their market share to 96% in February 2022.
CointelegraphdYdX said that it is looking at full decentralization to offer its users advantages of DeFi that centralized services can’t.
CointelegraphSplitting the transaction into multiple smaller transactions, periodic auction matching, and adjusting the low slippage are various ways to avoid front-running.
Cointelegraph