How a DEX Works (Decentralized Exchange)

Most people have no idea what a DEX is or how it works. DEX is short for Decentralized Exchange. It is synonymous with AMM, or Automated Market Maker. Holders of Real Crypto can use a DEX to trade cryptocurrency with other holders of Real Crypto in a manner consistent with Decentralized Finance.

A DEX is a key component of Real De-Fi (Decentralized Finance). Since most people who think they are in crypto are not in Real Crypto or Real De-Fi, understanding how to use a DEX instead of a CENEX (Centralized Exchange), is essential for escaping Fake Crypto and Fake De-Fi, and using cryptocurrency as it was intended: with no middlemen or centralized control.

This episode, I will discuss the basics for understanding DEXes. I compare a DEX to a CENEX. I discuss aspects such as an order book, order router, inventory, liquidity providing, liquidity pools, fees, slippage, market orders, limit orders, and viewing trading pairs as ratios.

 

In previous episodes, I have discussed basics about crypto, such as risks, terminology, and perspective. If you are unfamiliar with cryptocurrency, please listen to my episodes titled "Risks and Warnings", and the episode "What is Crypto?". Cryptocurrency is software. It is the best performing asset class in history. Historically, extreme price volatility has been the trade-off for that performance. Those of us who participate should educate ourselves accordingly.

This podcast IS for fans of cryptocurrency who want to learn more or better articulate what they know. This podcast IS NOT financial advice or trading advice!