{"id":2585,"date":"2023-01-04T08:14:15","date_gmt":"2023-01-04T08:14:15","guid":{"rendered":"https:\/\/www.rocketx.exchange\/blog\/?p=2585"},"modified":"2023-03-16T07:52:18","modified_gmt":"2023-03-16T07:52:18","slug":"what-is-a-decentralized-exchange-how-it-works","status":"publish","type":"post","link":"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/","title":{"rendered":"What is A Decentralized Exchange and How Does It Work?"},"content":{"rendered":"\n[et_pb_section fb_built=&#8221;1&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_row _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;]<h1><span class=\"ez-toc-section\" id=\"What_is_A_Decentralized_Exchange_and_How_Does_It_Work\"><\/span><span style=\"font-size: xx-large;\"><strong>What is A Decentralized Exchange and How Does It Work?\u00a0<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h1>[\/et_pb_text][et_pb_image src=&#8221;https:\/\/www.rocketx.exchange\/blog\/wp-content\/uploads\/2023\/01\/DEXs-blog-01.png&#8221; alt=&#8221;what is decentralized exchange (DEX)?&#8221; title_text=&#8221;DECENTRALIZED EXCHANGE&#8221; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/et_pb_image][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=&#8221;1_2,1_2&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;1_2&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_code _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;]<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_69_1 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#What_is_A_Decentralized_Exchange_and_How_Does_It_Work\" title=\"What is A Decentralized Exchange and How Does It Work?\u00a0\">What is A Decentralized Exchange and How Does It Work?\u00a0<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#What_is_a_Decentralized_exchangedex\" title=\"What is a Decentralized exchange(dex)?\">What is a Decentralized exchange(dex)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#How_does_a_Decentralized_exchangedex_work\" title=\"How does a Decentralized exchange(dex) work?\u00a0\">How does a Decentralized exchange(dex) work?\u00a0<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#Uniswap_%E2%80%93_how_it_works\" title=\"Uniswap &#8211; how it works?\u00a0\">Uniswap &#8211; how it works?\u00a0<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#what_is_an_Automated_market_makeramm\" title=\"what is an Automated market maker(amm)?\">what is an Automated market maker(amm)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#How_does_Uniswap_use_AMM_for_matching_trades\" title=\"How does Uniswap use AMM for matching trades?\u00a0\">How does Uniswap use AMM for matching trades?\u00a0<\/a><ul class='ez-toc-list-level-5' ><li class='ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#How_Uniswap_works_IN_REAL_WORLD\" title=\"How Uniswap works IN REAL WORLD?\">How Uniswap works IN REAL WORLD?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#DEXs_Using_On-Chain_Order_Books\" title=\"DEXs Using On-Chain Order Books\">DEXs Using On-Chain Order Books<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#Final_Words\" title=\"Final Words\">Final Words<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n[\/et_pb_code][\/et_pb_column][et_pb_column type=&#8221;1_2&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_cta button_text=&#8221;Click Here&#8221; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;]<p><span style=\"font-size: large;\"><em><span style=\"font-weight: 400;\">A DEX allows users to trade cryptocurrencies directly with each other, without an intermediary. It uses a decentralized network, often based on blockchain technology, to operate in a trustless manner, thereby reducing the risk of fraud or other wrongdoings.<\/span><\/em><\/span><\/p>[\/et_pb_cta][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;]<p><span style=\"font-weight: 400; font-size: large;\">The crypto world has two types of exchanges: <strong>centralized and decentralized<\/strong>, allowing users to trade cryptocurrencies.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">However, both exchanges work very differently. A centralized exchange (CEX) runs on an internal infrastructure and is controlled by a centralized entity. On the other hand, a decentralized exchange (DEX) is run by software that no one controls.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">In this article, we will explain <strong>how a DEX works<\/strong> moderately without the involvement of a centralized party. But, first, let\u2019s understand what a DEX is.<\/span><span style=\"font-size: large;\">\u00a0<\/span><\/p>[\/et_pb_text][et_pb_text _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;||0px|||&#8221; global_colors_info=&#8221;{}&#8221;]<h2><span class=\"ez-toc-section\" id=\"What_is_a_Decentralized_exchangedex\"><\/span><span style=\"font-size: x-large;\"><strong>What is a Decentralized exchange(dex)?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>\u00a0<span style=\"font-weight: 400; font-size: large;\">Short for decentralized exchange, a DEX is a marketplace that allows users to trade cryptocurrencies directly with each other. Such a marketplace works as per a smart contract, which essentially is software code that defines how a trade will happen fairly. This smart contract is deployed on a public chain for everyone to check and verify the authenticity of the underlying code of the DEX.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">One key feature of a DEX is that it allows users to trade assets directly with each other, using their own wallets and without the need to deposit their assets on the exchange. This can make the process faster and more secure, as users retain control of their assets at all times.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">Another important aspect of a Decentralized exchange is that it can operate in a trustless manner, meaning that users do not need to trust a central authority or intermediaries to facilitate their trades. This can help to reduce the risk of fraud or other types of wrongdoing, as there is no central point of failure that can be exploited.<\/span><span style=\"font-size: large;\">\u00a0<\/span><\/p>[\/et_pb_text][et_pb_cta button_text=&#8221;Click Here&#8221; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;e433b23a-a4e1-4163-99bc-36a0ce2f4c4f&#8221; global_colors_info=&#8221;{}&#8221;]<p><span style=\"font-size: medium;\"><em><span style=\"font-weight: 400;\">Since DEXs do not necessitate KYC compliance for users, they don\u2019t support fiat on-ramp functions. They are solely for trading one crypto with another.<\/span><\/em><\/span><\/p>[\/et_pb_cta][et_pb_text _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;]<h2><\/h2>\n<h2><span class=\"ez-toc-section\" id=\"How_does_a_Decentralized_exchangedex_work\"><\/span>How does a Decentralized exchange(dex) work?\u00a0<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400; font-size: large;\">It is understood that no central entity controls a DEX and that it runs as per its smart contract. But, how does such a marketplace work? Let\u2019s understand the working of a DEX through the example of one of the most popular decentralized exchanges, Uniswap.\u00a0<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Uniswap_%E2%80%93_how_it_works\"><\/span><strong>Uniswap &#8211; how it works?\u00a0<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400; font-size: large;\">Traditional, centralized exchanges work as per an order book, which essentially is a list of orders from different buyers and sellers for a certain asset. The list shows the prices and volumes that buyers are willing to buy and the sellers are willing to sell.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">Unlike CEXs, Uniswap does not use an order book for trades. Instead, it uses a variant of Automated Market Market (AMM) called Constant Product Market Maker.\u00a0<\/span><strong>\u00a0<\/strong><\/p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; custom_padding=&#8221;21px|||||&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; custom_margin=&#8221;||37px|||&#8221; hover_enabled=&#8221;0&#8243; inline_fonts=&#8221;Roboto Flex&#8221; global_colors_info=&#8221;{}&#8221; sticky_enabled=&#8221;0&#8243;]<h4><span class=\"ez-toc-section\" id=\"what_is_an_Automated_market_makeramm\"><\/span><span style=\"font-size: large;\"><strong>what is an Automated market maker(amm)?<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400; font-size: large;\">An automated market maker (AMM) is a type of system that is designed to facilitate the trading of assets, typically on a decentralized exchange (DEX). It uses algorithms to set the prices of the assets being traded and to automatically match buyers and sellers.<\/span><\/p>\n<p><span style=\"font-size: large;\">\u00a0<span style=\"font-weight: 400;\">One key aspect of an AMM is that it allows users to buy and sell assets without the need for a traditional order book. Instead, the AMM uses a mathematical formula to determine the price of an asset based on the supply and demand for that asset. This formula can be adjusted to ensure that the AMM remains solvent and able to fulfill trades.<\/span><\/span><\/p>\n<p><span style=\"font-size: large;\">\u00a0<span style=\"font-weight: 400;\">Another important feature of an AMM is that it can be programmed to offer liquidity to the market by automatically creating and filling orders for buy and sell trades. This helps to ensure that there is always someone available to trade with and that the market remains active and liquid.<\/span>\u00a0<\/span><\/p>\n<p><span style=\"font-family: inherit; font-weight: normal;\"><strong><span style=\"font-size: large;\">To simplify it: It is like a robot that helps people buy and sell cryptocurrencies by using special math to set the prices of the crypto assets people want to buy or sell. When someone wants to buy a cryptocurrency, the robot helps them find someone who has it and is willing to sell it. And when someone wants to sell an asset, the robot helps them find someone who wants to buy it.<\/span><\/strong><\/span><\/p>\n<p><span style=\"font-family: inherit; font-weight: normal;\"><strong><span style=\"font-size: large;\">The robot also helps ensure that someone is always available to buy or sell crypto, so people can always find someone to trade. It helps make the market for buying and selling crypto more active and easy to use.\u00a0<\/span><\/strong><\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">Overall, the goal of an AMM is to provide a simple, efficient, and decentralized platform for buying and selling assets. It allows users to trade without the need for a central authority or intermediaries, which can make the process faster, cheaper, and more secure.<\/span><\/p>[\/et_pb_text][et_pb_button button_url=&#8221;https:\/\/t.me\/RocketXexchange&#8221; url_new_window=&#8221;on&#8221; button_text=&#8221;JOIN US ON TELEGRAM&#8221; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;05fec754-b9ad-4caf-9e84-fc40bbabff89&#8243; custom_margin=&#8221;14px||39px|||&#8221; global_colors_info=&#8221;{}&#8221;][\/et_pb_button][et_pb_text _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;]<h4><span class=\"ez-toc-section\" id=\"How_does_Uniswap_use_AMM_for_matching_trades\"><\/span><strong><span style=\"font-size: large;\">How does Uniswap use AMM for matching trades?\u00a0<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400; font-size: large;\">The AMM that Uniswap uses is based on a mathematical formula called a &#8220;constant product formula.&#8221; The formula works by setting the price of an asset concerning the supply and demand for that asset. When the supply of an asset is high and the demand is low, the price will be low. When the supply is low and the demand is high, the price will be high.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">The constant product formula is expressed as follows:<\/span><\/p>\n<p><span style=\"font-size: large;\"><strong>price = constant \/ (supply * demand)<\/strong><\/span><\/p>\n<p><span style=\"font-size: large;\"><span style=\"font-weight: 400;\">\u00a0<\/span><span style=\"font-weight: 400;\">In this formula, &#8220;constant&#8221; is a fixed value set by the AMM. It represents the overall value of the pool of assets traded on Uniswap. &#8220;Supply&#8221; is the amount of the asset currently available for sale on Uniswap, and &#8220;demand&#8221; is the amount of the asset that buyers are willing to purchase.<\/span><\/span><\/p>\n<p><span style=\"font-size: large;\"><span style=\"font-weight: 400;\">\u00a0<\/span><span style=\"font-weight: 400;\">The constant product formula is designed to ensure that the AMM remains solvent and able to fulfill trades. If the AMM runs out of assets to sell, it can issue new tokens to buyers, which helps to maintain the constant value of the pool.<\/span><\/span><\/p>\n<p><span style=\"font-size: large;\"><span style=\"font-weight: 400;\">\u00a0<\/span><span style=\"font-weight: 400;\">Overall, the constant product formula is a key part of the AMM that powers Uniswap, and it helps to ensure that the platform can provide a simple, efficient, and decentralized way for users to buy and sell assets.<\/span><\/span><\/p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;]<h5><span class=\"ez-toc-section\" id=\"How_Uniswap_works_IN_REAL_WORLD\"><\/span><span style=\"font-size: large;\">How Uniswap works IN REAL WORLD?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h5>\n<p><span style=\"font-weight: 400; font-size: large;\">Imagine that you have 100 units of a cryptocurrency called &#8220;MyCoinX&#8221; that you want to sell on Uniswap. You connect your Ethereum wallet to Uniswap and deposit the MyCoinXs into the platform.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">At the same time, there are two other users on Uniswap who want to buy MyCoinXs. One user is willing to pay $10 for each MyCoinX, and the other is willing to pay $20.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">The AMM on Uniswap uses the constant product formula to determine the price of the MyCoinXs based on the supply (100 MyCoinXs) and the demand (the two users who want to buy them). The constant product formula is expressed as follows:<\/span><\/p>\n<p><strong><span style=\"font-size: large;\">price = constant \/ (supply * demand)<\/span><\/strong><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">In this case, the constant value is set at $2,000, which represents the overall value of the pool of assets being traded on Uniswap. Using this formula, the AMM calculates the price of the MyCoinXs as follows.<\/span><\/p>\n<p><strong><span style=\"font-size: large;\">price = $2,000 \/ (100 MyCoinXs * 2 buyers) price = $10 per MyCoinX<\/span><\/strong><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">This means that the users who want to buy MyCoinXs will pay $10 each for them. The AMM will then automatically execute the trades and transfer the MyCoinXs to the buyers.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">This is a very simplified example, but it illustrates how the constant product formula can be used to determine the price of an asset based on the supply and demand for that asset. In the real world, there are often many more factors at play, and the constant product formula is just one part of the complex algorithms that power the AMM on Uniswap.<\/span><\/p>[\/et_pb_text][et_pb_text _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;]<h4><span class=\"ez-toc-section\" id=\"DEXs_Using_On-Chain_Order_Books\"><\/span><strong><span style=\"font-size: large;\">DEXs Using On-Chain Order Books<\/span><\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p><span style=\"font-weight: 400; font-size: large;\">In addition to the AMM model, DEXs use frameworks like an on-chain order book for decentralized trading.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">On a DEX that uses an on-chain order book, the order book is stored on the blockchain, along with all the other information related to the exchange. This can make the order book more transparent and immutable, as it is stored on a decentralized network of computers that are managed by multiple parties.<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">One advantage of an on-chain order book is that it can allow for faster and more efficient matching of buy and sell orders. Because the order book is stored on the blockchain, it can be accessed and updated by multiple parties simultaneously, which can reduce delays in the trading process.<\/span><\/p>\n<p><span style=\"font-weight: 400;\"><span style=\"font-size: large;\">Another advantage is that an on-chain order book can provide more transparency and security, as it is stored on a decentralized and immutable platform. As it is more difficult to manipulate or alter the order book. It significantly minimizes the chance of fraud.<\/span> <\/span><\/p>[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=&#8221;1_3,1_3,1_3&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;1_3&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_button button_url=&#8221;https:\/\/app.rocketx.exchange\/swap\/ETH.ethereum\/BTC.bitcoin\/.75&#8243; url_new_window=&#8221;on&#8221; button_text=&#8221;ETH to BTC&#8221; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;05fec754-b9ad-4caf-9e84-fc40bbabff89&#8243; global_colors_info=&#8221;{}&#8221;][\/et_pb_button][\/et_pb_column][et_pb_column type=&#8221;1_3&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_button button_url=&#8221;https:\/\/app.rocketx.exchange\/swap\/AVAX.binance-peg-avalanche\/POLY.matic-network\/50&#8243; url_new_window=&#8221;on&#8221; button_text=&#8221;AVAX to MATIC&#8221; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;05fec754-b9ad-4caf-9e84-fc40bbabff89&#8243; global_colors_info=&#8221;{}&#8221;][\/et_pb_button][\/et_pb_column][et_pb_column type=&#8221;1_3&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_button button_url=&#8221;https:\/\/app.rocketx.exchange\/swap\/ETH.tether\/BNB.tether\/1000&#8243; url_new_window=&#8221;on&#8221; button_text=&#8221;USDT <a href=\"https:\/\/www.rocketx.exchange\/blog\/cross-chain-swap-bridge-rocketx\/\">Bridge<\/a> (ERC20 to BEP20)&#8221; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;05fec754-b9ad-4caf-9e84-fc40bbabff89&#8243; global_colors_info=&#8221;{}&#8221;][\/et_pb_button][\/et_pb_column][\/et_pb_row][et_pb_row _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;4_4&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_text _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; locked=&#8221;off&#8221; global_colors_info=&#8221;{}&#8221;]<h3><span class=\"ez-toc-section\" id=\"Final_Words\"><\/span><span style=\"font-size: large;\"><strong>Final Words<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400; font-size: large;\">With the rise of the <a href=\"https:\/\/www.rocketx.exchange\/blog\/lessons-learned-from-ftx-fiasco-and-importantce-of-self-custody-of-crypto\/\">self-custody<\/a> narrative caused by recent events like<a href=\"https:\/\/www.rocketx.exchange\/blog\/lessons-learned-from-ftx-fiasco-and-importantce-of-self-custody-of-crypto\/\"> FTX and Celsius<\/a>, DEXs are observing an uptick in usage. It is mostly because they are designed to be decentralized, allowing users to trade assets directly with each other without the need for a central authority or intermediaries.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\">If the momentum continues and as the world becomes more aware of \u201cNot Your Keys, Not Your Coins\u201d, <strong>we are likely to see a massive shift from centralized exchanges to decentralized exchanges in the coming time.<\/strong>\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400; font-size: large;\"><\/span><\/p>[\/et_pb_text][et_pb_divider _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/et_pb_divider][\/et_pb_column][\/et_pb_row][et_pb_row column_structure=&#8221;1_2,1_2&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_column type=&#8221;1_2&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_blog posts_number=&#8221;1&#8243; include_categories=&#8221;29&#8243; excerpt_length=&#8221;150&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/et_pb_blog][\/et_pb_column][et_pb_column type=&#8221;1_2&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][et_pb_blog posts_number=&#8221;1&#8243; include_categories=&#8221;46&#8243; excerpt_length=&#8221;200&#8243; _builder_version=&#8221;4.18.1&#8243; _module_preset=&#8221;default&#8221; global_colors_info=&#8221;{}&#8221;][\/et_pb_blog][\/et_pb_column][\/et_pb_row][\/et_pb_section]\n","protected":false},"excerpt":{"rendered":"<p>What is A Decentralized Exchange and How Does It Work?\u00a0<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_69_1 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#What_is_A_Decentralized_Exchange_and_How_Does_It_Work\" title=\"What is A Decentralized Exchange and How Does It Work?\u00a0\">What is A Decentralized Exchange and How Does It Work?\u00a0<\/a><ul class='ez-toc-list-level-2' ><li class='ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#What_is_a_Decentralized_exchangedex\" title=\"What is a Decentralized exchange(dex)?\">What is a Decentralized exchange(dex)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#How_does_a_Decentralized_exchangedex_work\" title=\"How does a Decentralized exchange(dex) work?\u00a0\">How does a Decentralized exchange(dex) work?\u00a0<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#Uniswap_%E2%80%93_how_it_works\" title=\"Uniswap &#8211; how it works?\u00a0\">Uniswap &#8211; how it works?\u00a0<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#what_is_an_Automated_market_makeramm\" title=\"what is an Automated market maker(amm)?\">what is an Automated market maker(amm)?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#How_does_Uniswap_use_AMM_for_matching_trades\" title=\"How does Uniswap use AMM for matching trades?\u00a0\">How does Uniswap use AMM for matching trades?\u00a0<\/a><ul class='ez-toc-list-level-5' ><li class='ez-toc-heading-level-5'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#How_Uniswap_works_IN_REAL_WORLD\" title=\"How Uniswap works IN REAL WORLD?\">How Uniswap works IN REAL WORLD?<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#DEXs_Using_On-Chain_Order_Books\" title=\"DEXs Using On-Chain Order Books\">DEXs Using On-Chain Order Books<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.rocketx.exchange\/blog\/what-is-a-decentralized-exchange-how-it-works\/#Final_Words\" title=\"Final Words\">Final Words<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\nA DEX allows users to trade cryptocurrencies directly with each other, without an intermediary. It uses a decentralized network, often based on blockchain technology, to operate in a trustless manner, thereby reducing the risk of fraud or other wrongdoings.The crypto world has two types of exchanges: [&hellip;]<\/p>\n","protected":false},"author":8,"featured_media":2590,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","rank_math_lock_modified_date":false,"footnotes":""},"categories":[157],"tags":[159,158,411,409,414,162,54,160,81,407,412,59,65,410,408,156,161,415,413],"class_list":["post-2585","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-academy","tag-amm","tag-automated-market-maker","tag-best-decentralized-crypto-exchange","tag-best-decentralized-exchange","tag-best-decentralized-exchanges","tag-best-dex","tag-cross-chain-swaps","tag-crypto-aggregator","tag-crypto-exchange","tag-decentralized-crypto-exchange","tag-decentralized-crypto-exchanges","tag-decentralized-crypto-swap","tag-decentralized-exchange","tag-decentralized-exchange-crypto","tag-decentralized-exchanges","tag-dex","tag-dex-aggregator","tag-top-decentralized-exchanges","tag-what-is-a-decentralized-exchange","et-has-post-format-content","et_post_format-et-post-format-standard"],"_links":{"self":[{"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/posts\/2585"}],"collection":[{"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/comments?post=2585"}],"version-history":[{"count":34,"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/posts\/2585\/revisions"}],"predecessor-version":[{"id":3180,"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/posts\/2585\/revisions\/3180"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/media\/2590"}],"wp:attachment":[{"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/media?parent=2585"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/categories?post=2585"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rocketx.exchange\/blog\/wp-json\/wp\/v2\/tags?post=2585"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}