Recently, someone asked me what a DEX is, so I decided to organize my understanding. It’s actually not as complicated as it seems.

Simply put, a DEX is a decentralized exchange, the full name being Decentralized Exchange. What’s the biggest difference from the centralized exchanges we usually use? No registration, no KYC, and no need to entrust your wallet to the platform. You keep your private keys yourself, trade when you want, and leave when you're done. This is the concept of permissionless, non-custodial trading.

Industry data shows that the trading volume share of decentralized exchanges has been increasing year by year. A few years ago, this proportion was less than 1%, but it gradually started to break through. What does this indicate? It shows that more and more people are beginning to accept and use DEXs.

There are mainly two types of DEXs. One is order book-based, where buyers and sellers directly match orders, similar to traditional stock exchanges. This method requires high liquidity, so it’s more suitable for projects with large trading volumes and many participants. IDEX is a representative of this type.

The other type is based on liquidity pools, using Automated Market Maker (AMM) technology. This model completely changes the game rules. Anyone can put their assets into a liquidity pool, act as a market maker, and earn from trading fees. It sounds complicated, but it’s basically providing liquidity, and the platform automatically matches trades for you, allowing you to earn passive income.

Why is the AMM model so popular in DeFi? Because early DeFi projects lacked liquidity, and using order book exchanges would make it impossible to gather enough counterparties. But AMM is different—if someone is willing to provide liquidity, trades can happen. This is very friendly to emerging projects.

Uniswap is the leader in this field, achieving market dominance with the AMM model. Besides Uniswap, projects like Bancor, Balancer, and Curve are continuously innovating AMM technology, trying to solve issues like capital efficiency and slippage.

Honestly, after experiencing DEX trading, you’ll find that the entire DeFi ecosystem isn’t that mysterious. What attracts me most is the feeling of complete autonomy and trustlessness. Just connect your wallet, select the trading pair, and everything is executed automatically by smart contracts, with funds directly returning to your wallet. That’s the essence of blockchain.

If you’re still confused about what a DEX is, the best way is to try it yourself. You can find many DEX projects on Gate to experience different platforms. Trust me, once you try it once, you’ll understand why more and more people are optimistic about the future of DEXs.