The three main types of DEXs
A DEX is a peer-to-peer marketplace where people can trade cryptocurrencies without handing over the management of their funds to an intermediary or custodian. The transactions made while trading cryptocurrencies are facilitated through the code of smart contracts that are running on a blockchain.
Peer-to-peer (P2P), by its definition, means the architecture of DEX partitions tasks (or workloads) between peers, which are the nodes participating in the blockchain network. Each node in the system is equally privileged and equipotent.
DEXs have all the characteristics of DeFi applications we discussed in Chapter 1, Introduction to DeFi. Let’s take non-custodial, for example. The users of DEXs have full control of their own crypto assets. When trading crypto, the DEX doesn’t hold the user’s cryptocurrencies and the users can get the tokens they exchange on the spot once the transaction is completed. Meanwhile, every DEX is open because...