As an important part of the cryptocurrency field, decentralized exchanges (DEX) have attracted much attention for their advantages, not only because of their technological innovation, but also because of their revolutionary impact. This article will explore the advantages of decentralized exchanges in depth and reveal their important position in the world of digital currency.

When exploring the advantages of decentralized exchanges, the first thing to come to mind is their emphasis on security and transparency. Compared with centralized exchanges, DEX does not store user funds in a centralized manner, which fundamentally eliminates the risk of hacker attacks. Taking the bankruptcy of Mt.Gox Exchange in 2014 as a lesson, the security risks of centralized exchanges are clear at a glance. In contrast, DEX uses smart contract technology to achieve autonomous control of user funds, thereby eliminating single points of failure and ensuring the security of user assets. This security based on blockchain technology allows investors to focus on transactions without distractions, injecting a shot of confidence into the digital currency market.

In addition, another major advantage of decentralized exchanges is that they eliminate the monopoly position given by middlemen and achieve a more fair and transparent trading environment. Centralized exchanges are often controlled by a few giants who can manipulate the market and prices, leaving small retail investors far behind. However, the emergence of DEX has changed this situation, giving every participant an equal opportunity to participate in transactions without worrying about being manipulated or losing their interests. For example, Uniswap, as a well-known decentralized exchange, allows anyone to provide liquidity and obtain corresponding rewards through the liquidity pool mechanism, realizing the democratization of the trading market and allowing everyone to share the dividends of the digital currency market.

In addition, the advantages of decentralized exchanges are also reflected in their globalization and 24/7 trading characteristics. Traditional financial markets are restricted by time zones and have limited trading hours, while DEX is open around the clock, allowing investors from all over the world to participate in transactions freely, realizing the globalization of the digital currency market. Transactions of cryptocurrencies such as Bitcoin and Ethereum are carried out in real time without any intermediary interference, making transactions more convenient and efficient.

Finally, the advantages of decentralized exchanges also lie in their community-driven and innovative nature. DEX is often maintained and developed by the community, attracting a large number of technology enthusiasts and professionals in the field of cryptocurrency to participate, and constantly promoting technological innovation and product optimization of exchanges. For example, SushiSwap, as a community-driven DEX, has launched more innovative features based on Uniswap, attracting the attention of a large number of users and investors, and demonstrating the huge potential of decentralized exchanges in innovation.

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

An exchange in the crypto space is a platform where users buy and sell other tokens held by their tokens directly or indirectly from other users. There are two main types of exchanges in the crypto ecosystem, one is a decentralized exchange and the other is a centralized exchange. Today, I will focus on introducing decentralized exchanges. A decentralized exchange is an exchange that is not controlled by any person or centralized entity and is fully automated through smart contracts. It is one of the many types of decentralized applications on the blockchain. Many investors want to know what are the advantages of decentralized exchanges before using them? Let the editor of the currency circle introduce it to you.

 What are the advantages of decentralized exchanges

First of all, decentralized exchanges mainly carry out transaction matching, on-chain asset clearing and settlement, etc. User assets are managed by smart contracts and controlled by users, and exchanges do not touch user assets.

Secondly, the greatest value of decentralized exchanges is that users have absolute control over their assets. All transaction data and records will be on the chain through blockchain smart contracts, thereby ensuring the openness and transparency of transactions, greatly reducing the cost of users' trust in exchanges.

Again, it is difficult for hackers to steal user assets unless they can get the private key of each user. Even if the exchange private key is leaked, the user assets cannot be transferred without the user private key, so it is very safe. With decentralized exchanges, you no longer have to worry about the risk of losing or stealing coins. For this reason, as the underlying technology of blockchain gradually matures, decentralized exchanges have great development potential and are the trend of the future.

 Types of decentralized exchanges

1. Order book DEX

This type of DEX is one of the main methods for DEX creation. The model maintains a record of open orders for each buy and sell asset. Purchase orders show the trader's interest in buying and bidding for assets at a fixed price. In addition, sell orders show that the trader wants to sell or request a special exchange rate for the above assets. The difference between interest rates is what determines the strength of the order book and the market interest rate of the asset.

There are two different order book DEXs: on-chain order books and off-chain order books. On-chain order book DEX refers to DEX that stores open order data on the chain. These DEXs can help traders improve their positions with funds from lenders on their platforms.

However, off-chain order book DEX stores the order book of the blockchain network. They allow for trade settlement on the blockchain. Therefore, they provide the value of centralized crypto exchanges. Another key feature of order book DEX platforms is the challenge of liquidity issues. Usually, order book DEXs are associated with centralized exchanges and enforce additional changes for on-chain transactions. However, off-chain order book DEXs can eliminate fees due to smart contract-related issues.

2. AMM (Automated Market Maker)

AMM is another type of DEX. It effectively uses smart contracts to identify liquidity risks. AMM enhances blockchain-related services to obtain data from exchanges and other platforms to fix the ratio of trading assets.

Blockchain-based services are called blockchain oracles. Smart contracts can increase liquidity pools instead of matching buy and sell orders. These pools are generally pre-deposited treasure pools and play a pivotal role in the functioning of AMMs.

Users fund these pools and enjoy rewards through transaction fees allocated for transactions on specific currency pairs. These users or liquidity providers should deposit a similar value of each benefit in the trading pair to increase interest in their crypto treasures through liquidity mining.

The liquidity pool created in the AMM can allow traders to execute orders. At the same time, traders can freely increase their interests without trust. Usually, the ranking of these DEXs depends on the total amount of funds locked in their smart contracts.

Due to the increasing lack of liquidity, AMM-based DEXs also have terrible difficulties with slippage. If insufficient liquidity causes buyers to pay an order price higher than the market price, you will see slippage. In these cases, larger orders may experience higher slippage. In addition, due to the unpredictability of one asset in a trading pair, liquidity providers may experience difficulties with temporary losses.

3. DEX Aggregator

DEX aggregators have also become popular. Generally, they are trading protocols that originate and route liquidity between multiple DEXs based on specific needs. After that, DEX aggregators no longer need to serve traders only from their liquidity pools. So you can see how they provide an effective method for crypto trading.

I hope that investors can understand the advantages of decentralized exchanges through the above content. In addition to some benefits of decentralized exchanges, beginners should also understand the risks associated with them, among which smart contract issues are common risks associated with DEX, and simple errors in smart contracts may skip comprehensive code reviews and detailed audits, leading to more problems. In addition, people who aim for liquidity can list new tokens on DEX platforms, it can also lead to carpet pulling scams, where investors can buy a token and think they will get another token, so traders must do their due diligence on token verification before trading.

In summary, the advantages of decentralized exchanges are not only in their security and transparency, but also in fairness, globalization, and innovation. With the continuous development of the digital currency market, it is believed that decentralized exchanges will play an increasingly important role in the future, bringing more possibilities and vitality to the entire cryptocurrency ecosystem. Let us look forward to the light of decentralized exchanges and lead the future of digital currency!