The problem is that the methods used by CEXs use techniques that require lots of computation with low latency. This is because prior to AMMs, DEXs tried to mimic the way centralized exchanges facilitated trades. AMMs made it easier and more attractive to add liquidity.īefore Uniswap came along with a working AMM, trading on a DEX was slow, and cryptoassets on the exchange often traded at a premium to the same cryptoasset on a CEX. Before AMMs, DEXs struggled with liquidity problems. Uniswap brought with it the first working decentralized automated market maker (AMM). Which DEX was the first might be in dispute, however it seems clear that one DEX in particular changed the landscape forever: Uniswap. In addition to facilitating exchange between different cryptoassets, many DEXs also have ways to earn cryptoassets without trading.ĭEXs have existed in crypto in one form or another as early as 2012 to 2014, depending on how you qualify a DEX. They are how you swap into and out of cryptoassets. DEXs are important to a blockchain’s ecosystem, because they’re the first decentralized App (dAPP) that you typically interact with when arriving on a new chain. Arguably, without high-quality, liquid DEXs, DeFi wouldn’t have experienced the incredible growth it has.ĭEXs exploded in popularity on Ethereum, but have since migrated to every blockchain with general purpose smart contract functionality. DEXs are a core component of decentralized finance (DeFI). Unlike centralized exchanges (CEXs), DEXs do not require a trusted third party, or intermediary, to facilitate the exchange of cryptoassets.Ī core tenet of crypto is the disintermediation of finance, because it increases the economic freedom of individuals everywhere in the world no matter who they may be. A decentralized exchange (DEX) is a type of exchange that specializes in peer-to-peer transactions of cryptocurrencies and digital assets.
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