Overview of Decentralized Exchanges

The rapid development of the blockchain and digital currency market has led to the prosperity of digital currency exchanges that provide asset liquidity. According to the degree of centralization, exchanges can be divided into three forms: centralized exchanges, decentralized exchanges and wallets.

The biggest difference between centralized exchanges and decentralized exchanges lies in the way of fund custody and transaction process. Fund custody, transaction matching, settlement and clearing of centralized exchanges are all completed by the exchange, while the assets of decentralized exchanges are controlled by users, and only undertake transaction matching, asset clearing and settlement on the chain and other links.

Decentralized exchanges can be divided into four types according to the differences in order process and transaction matching design:

The greatest value of a decentralized exchange is that users have absolute control over their own assets, and transaction orders will eventually be operated on the chain through blockchain smart contracts, which ensures the openness and transparency of transactions and greatly reduces the user's trust in the exchange. Trust costs, but there are also problems such as poor user experience, weak liquidity, and legal currency exchange. However, with the gradual maturity of the underlying technology of the blockchain, the transaction experience and transaction speed of the decentralized exchange will also be improved and strengthened. Therefore, the development of the entire decentralized exchange industry still has great potential. Centralized exchanges and decentralized exchanges will maintain a coexistence situation for a long time.