Decentralized Exchange – Everything You Need to Know

A decentralized exchange (DEX) is a crypto trading and liquidity pool or aggregator platform that allows investors to hold their keys. Frankly, there are not as many decentralized exchanges as there are centralized exchanges (CEX) today. Since many investors prefer to hold their keys to have full control of their digital assets, DEXs are growing in popularity and will soon overtake their competitors, CEXs.

A decentralized exchange uses a smart contracts approach to ensure that investors earn interest when they create liquidity pools, and they can borrow crypto or trade without the need of an intermediary. This lowers the facilitation fees, gives borrowers a lower rate, and investors get higher interest for their crypto.

Types of Decentralized Exchanges

As an investor, you should look for a decentralized exchange with the most benefits for you. If you are new to this sector, here are some of the best options for you.

Order book decentralized exchanges

The traditional way of operating DEXs uses an order book, just like the CEX. This means that the market price is determined by the open price and how the digital assets are spread. It is like a demand and supply concept to know how much value to give the current trading assets.

Platforms such as Binance DEX use the order book and borrow a lot from traditional exchanges. However, the investors still retain their digital assets in their wallets, and therefore, the chain only holds the relevant information during trading. That is why they are decentralized.

Swap decentralized exchanges

These are the modern DEXs that apply liquidity pool protocols to find the asset prices. They use an automated market maker (AMM) and non-custodial wallet approach to execute their crypto transactions immediately and easily. The name swap comes in because of these fast transactions without the need for an intermediary.

Some of the top platforms include Uniswap, DODO, and Loop Finance. If you want to get additional hints on the latter, visit their website. You will not only learn about how to trade, but how to earn passive income by creating liquidity pools on a reliable platform.

Aggregator decentralized exchanges

An aggregator is a decentralized exchange with secure and dynamic protocols that bring many platforms together to facilitate decentralized trading. They may bring numerous DEXs together, and this has the benefit of reducing slippage challenges that are caused by insufficient finances in one DEX. So, they support large trading and liquidity pool creation without any challenges.

Benefits of Using a Decentralized Exchange

Many investors prefer to earn a passive income through a liquidity pool or trading in a decentralized exchange to enjoy the benefits. Apart from earning tokens that you can trade, these platforms are fast and secure. Imagine trading on a platform where you do not need to transfer your crypto to the exchange. The no custodial wallet approach entices many investors. Lastly, one can invest and trade large amounts of crypto at once because aggregators reduce slippage, as we have already mentioned. This is a big plus for large investors.


Decentralized exchange is the way to go if you want to earn more interest on your investment or trade without risks. If you are new in the crypto world, you now know the direction to take. Thanks to these insights, you even know where to start.

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Last modified: September 27, 2021

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