DEX Trading

Learn how to trade stablecoins on decentralized exchanges, understand fees and liquidity.

What is a DEX?

DEX (Decentralized Exchange) is a trading platform based on blockchain technology that allows users to swap tokens directly on-chain without a central authority or intermediaries.

Characteristics of DEX

1. Decentralization

• No central server required
• Managed by smart contracts
• Users directly control assets

2. No KYC Required

• Most DEXs don't require identity verification
• Privacy protection
• Globally accessible

3. Non-Custodial

• Funds always in user's wallet
• No need to trust the exchange
• Reduces hacking risk

4. Transparent

• All transactions verifiable on-chain
• Open source code
• Auditable

DEX vs CEX

Centralized Exchange (CEX)

Advantages:

• Simple to use
• Good liquidity
• Fast trading
• Customer support available

Disadvantages:

• KYC required
• Funds held by exchange
• May be hacked
• Regulatory risks

Decentralized Exchange (DEX)

Advantages:

• No KYC required
• Funds in user's wallet
• More secure
• Globally accessible

Disadvantages:

• Gas fees required
• Trading may be slower
• Liquidity may be lower
• Relatively complex to use

Major DEX Platforms

1. Uniswap

Networks: Ethereum, Polygon, Arbitrum, Optimism

Features:

• Largest DEX
• Automated Market Maker (AMM) model
• Best liquidity
• Supports multiple tokens

Suitable for:

• Major token trading
• Large transactions
• Liquidity provision

Fees:

• Trading fee: 0.05% - 1% (depends on pool)
• Gas fee: High (mainnet)

2. Curve

Networks: Ethereum, Polygon, Arbitrum, Avalanche

Features:

• Designed for stablecoins
• Extremely low slippage
• Suitable for large transactions
• Yield optimization

Suitable for:

• Stablecoin trading
• Large stablecoin swaps
• Low slippage needs

Fees:

• Trading fee: 0.04% - 0.4%
• Gas fee: Medium

3. PancakeSwap

Network: BSC (Binance Smart Chain)

Features:

• Largest DEX on BSC
• Extremely low gas fees
• Fast trading
• Rich yield farms

Suitable for:

• BSC ecosystem tokens
• Small transactions
• Yield farming

Fees:

• Trading fee: 0.25%
• Gas fee: Very low

4. SushiSwap

Networks: Multi-chain

Features:

• Multi-chain support
• Yield farms
• Community governance
• Innovative features

Suitable for:

• Multi-chain trading
• Yield farming
• Community participation

Fees:

• Trading fee: 0.3%
• Gas fee: Depends on network

5. Orca

Network: Solana

Features:

• Mainstream DEX on Solana
• Extremely fast trading
• Very low gas fees
• Good user experience

Suitable for:

• Solana ecosystem tokens
• Fast trading
• Low fee requirements

Fees:

• Trading fee: 0.3%
• Gas fee: Very low

How to Trade on DEX

Preparation

1. Prepare Wallet

• Install MetaMask or other Web3 wallet
• Ensure sufficient ETH in wallet for gas fees
• Backup seed phrase

2. Prepare Tokens

• Ensure tokens to trade are in wallet
• For stablecoin trading, prepare USDC, USDT, etc.

3. Select Network

• Choose network based on tokens to trade
• Ensure wallet is connected to correct network

Trading Steps (Uniswap Example)

1. Connect Wallet

• Visit Uniswap website
• Click "Connect Wallet"
• Select wallet type
• Confirm connection

2. Select Trading Pair

• Select token to sell (From)
• Select token to buy (To)
• Enter trading amount

3. Review Transaction Info

• Check expected tokens to receive
• Check slippage tolerance
• Check gas fee estimate

4. Confirm Transaction

• Click "Swap"
• Confirm transaction in wallet
• Wait for transaction confirmation

5. Transaction Complete

• After confirmation, tokens will automatically arrive
• Check balance in wallet

Trading Fees Explained

1. Trading Fees

Definition:

• Trading fees charged by DEX
• Usually calculated as percentage of trade amount
• Distributed to liquidity providers

Common Rates:

• Uniswap: 0.05% - 1%
• Curve: 0.04% - 0.4%
• PancakeSwap: 0.25%
• SushiSwap: 0.3%

Influencing Factors:

• Trading pair type
• Liquidity pool settings
• Protocol policies

2. Gas Fees

Definition:

• Fees for blockchain network to process transactions
• Paid to miners/validators
• Depends on network congestion

Influencing Factors:

• Network congestion level
• Transaction complexity
• Gas price settings

How to Reduce:

• Choose networks with low gas fees (Layer 2)
• Trade when network is not congested
• Use gas optimization tools

3. Slippage

Definition:

• Difference between execution price and expected price
• Caused by insufficient liquidity
• Larger slippage for large transactions

How to Reduce:

• Choose pools with good liquidity
• Set slippage tolerance
• Split large orders

Understanding Liquidity

What is Liquidity?

Definition:

• Ability to quickly buy and sell assets
• Market depth
• Affects trading price and slippage

Importance:

• Better liquidity means less slippage
• Large transactions need high liquidity
• Affects trading experience

How to Check Liquidity?

Metrics:

• Total Value Locked (TVL)
• 24-hour trading volume
• Liquidity pool depth

Tools:

• DEX interface display
• DeFiLlama
• Dune Analytics

Liquidity Risks

Risks:

• Liquidity may suddenly deplete
• Large transactions may affect price
• Impermanent loss

How to Cope:

• Choose pools with good liquidity
• Diversify trades
• Monitor liquidity changes

Trading Strategies

1. Small Transaction Strategy

Suitable for:

• Testing trades
• Small swaps
• Learning operations

Recommendations:

• Choose networks with low gas fees
• Use Layer 2
• Batch operations

2. Large Transaction Strategy

Suitable for:

• Large stablecoin swaps
• Portfolio adjustments

Recommendations:

• Choose pools with good liquidity
• Use Curve (for stablecoins)
• Split transactions
• Set reasonable slippage tolerance

3. Arbitrage Strategy

Suitable for:

• Price differences between DEXs
• Cross-chain arbitrage

Requirements:

• Fast execution
• Low gas fees
• Sufficient funds

4. Liquidity Provision Strategy

Suitable for:

• Long-term token holding
• Earning fee income

Recommendations:

• Choose stablecoin pairs
• Understand impermanent loss
• Diversify across multiple pools

Security Considerations

1. Wallet Security

Recommendations:

• Use hardware wallet (for large funds)
• Don't share private keys
• Regularly check authorizations
• Use official wallets

2. Trading Security

Recommendations:

• Carefully check transaction info
• Confirm trading pair is correct
• Check slippage settings
• Don't click suspicious links

3. Protocol Security

Recommendations:

• Use reputable DEXs
• Check protocol audit reports
• Monitor security announcements
• Avoid new protocols (unless fully understood)

4. Network Security

Recommendations:

• Ensure connected to correct network
• Don't use public Wi-Fi
• Use VPN (if needed)
• Regularly update software

Common Questions

Q: How long does DEX trading take?

A: Depends on network:

• Ethereum mainnet: Minutes to tens of minutes
• Layer 2 (Arbitrum, Polygon): Seconds to minutes
• Solana: Seconds

Q: Why did the transaction fail?

A: Common reasons:

• Insufficient gas fees
• Slippage exceeds tolerance
• Insufficient balance
• Network congestion

Q: How to reduce trading costs?

A: Methods:

• Use Layer 2 networks
• Trade when network is not congested
• Batch operations
• Choose DEXs with low fees

Q: Is DEX safer than CEX?

A: Each has advantages:

• DEX: Funds in user's wallet, safer
• CEX: Customer support, simple to use
• Choose based on needs

Summary

DEX trading provides:

1. Decentralization: No need to trust exchange
2. Privacy Protection: Most don't require KYC
3. Global Accessibility: Available 24/7
4. Transparency: All transactions verifiable on-chain

When Using DEX:

• Choose reputable platforms
• Understand fee structure
• Pay attention to liquidity
• Manage risks properly
• Start with small amounts

Remember: While DEX provides more freedom and privacy, it also requires more technical knowledge and risk management skills.

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Next Steps:

• 💧 Liquidity Pools - Learn about liquidity provision
• 🚜 Yield Farming - Explore yield opportunities
• 📚 Protocols - Deep dive into protocols