You can learn about the differences between Decentralized (DEX) and Centralized (CEX) Exchanges here . Now we’ll briefly cover how to trade on a DEX.
The exchange process itself is extremely simple. You do not need to register on the exchange, make a deposit to trade, or submit your personal data to the exchange operator. You just connect your crypto wallet and immediately see all the tokens available to exchange. Then you choose what you want to exchange and confirm the transaction – and the tokens you acquired are instantly transferred to your wallet.
There are no centralized intermediary companies involved in this transaction; the exchange is conducted between you and another user, while a smart contract, i.e. automated program code, serves as an intermediary and guarantor.
A DEX is a smart contract working on any blockchain, including Ethereum (for instance, the Uniswap Exchange), BNB Smart Chain (the PancakeSwap Exchange), TON (the STON.fi DEX), and others. The availability of tokens on the platform depends on the DEX blockchain that you choose. The tokens must be generated on the same blockchain. There are, however, so-called cross-chain bridges that make it possible to use one platform to exchange tokens generated on different blockchains.
How is money made on DEXes?
First of all, this is where you can find tokens of new projects (the tokens that have passed IDO). They can multiply your profit to a level that, as a rule, cannot be reached with regular trading.
Secondly, DEXs that use automated market-making (AMM) trade by means of liquidity pools, where you can put tokens to earn a passive income – in essence, depositing cryptocurrency to accrue interest.
Thirdly, DEXs using the Proof-of-Stake (PoS) algorithm allow you to earn on staking, which is a substitute for mining on such blockchains. Simply send the smart contract a certain number of tokens – they will be used to secure the network’s function, and you will receive some amount of compensation.