I’ve only recently truly understood why so many people are starting to pay attention to DEX exchanges. To be honest, at first I was a bit confused by all the concepts, but after taking a closer look, I realized it’s not that complicated.

Simply put, decentralized exchanges are places where you can trade without KYC, registration, or login—just connect your wallet directly. Compared to centralized exchanges that often require filling out a bunch of information, DEXs are very attractive due to their convenience. More importantly, your assets are always in your control, with no custodial risk.

July last year was a milestone for DEX exchanges. That month, trading volume exceeded $4 billion, jumping from 2.1% in June to 3.95%. To put it into perspective, before that, this ratio had never exceeded 1%. This growth rate clearly reflects the rapidly increasing demand for decentralized trading in the market.

Regarding the types of DEX exchanges, there are mainly two approaches. The first is order book-based, where buyers and sellers place orders that match and execute, similar to traditional exchanges. Users can place limit or market orders, and if the depth is sufficient, the trading experience is pretty good. However, this model has a problem: it requires very high liquidity, and small trading volumes can easily cause slippage.

The second is the automated market maker (AMM) model based on liquidity pools. This has become popular in the DeFi space recently, but it has actually been used in traditional finance for over a decade. The core idea is: users deposit assets into liquidity pools, algorithms automatically match trades, and liquidity providers earn from trading fees.

I found that the AMM model is especially suitable for DeFi tokens. Early-stage DeFi projects often lack liquidity, and using order book-based DEXs can actually worsen price volatility, creating a vicious cycle. But AMMs are different—anyone can become a liquidity provider, allowing funds within the ecosystem to be fully utilized.

Uniswap is currently the leader in the DEX space, using the AMM model to enable anyone to provide liquidity and earn transaction fees. Besides that, projects like Bancor, Balancer, and Curve are continuously innovating AMM technology to provide real-time liquidity for various digital assets.

Compared to traditional market makers, AMMs have clear advantages: they are safe and reliable, have no regional restrictions, and do not require custody. That’s also why DEX exchanges have been able to develop rapidly during the DeFi wave.

Honestly, the best way to judge whether a DEX is worth trying is to experience it yourself. Once you try a trustless trading method, you’ll realize that DeFi and decentralized exchanges are not as complicated as you might think. With improved capital efficiency and proper risk management, there’s still a lot of room for growth in this field.