> For the complete documentation index, see [llms.txt](https://startower.gitbook.io/star-tower-chain/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://startower.gitbook.io/star-tower-chain/basic-knowledge/what-is-dex.md).

# What is DEX

There are two types of cryptocurrency exchanges, centralized exchanges and decentralized exchanges. Currently, centralized exchanges maintain an important dominant position in the trading market. However, the development of decentralized exchanges cannot be ignored. Decentralized exchanges are commonly known as DEX, short for Decentralized exchange. In simple terms, they are exchanges without permission and non-custodial. The main characteristic is that most of them do not require KYC, registration or login. They are exchanges that provide trading and exchange services and can be used immediately and left at any time.

As a blockchain-based exchange, DEX does not store users' funds and personal information on servers. Instead, it only serves as an infrastructure to match buyers and sellers who wish to trade digital assets. With the help of a matching engine, this kind of transaction occurs directly between participants (peer-to-peer). Therefore, users of decentralized exchanges must keep their public keys, private keys, and mnemonic phrases well. Once lost, the assets cannot be recovered.

There are two types of DEX. The first is an order-based P2P exchange, which uses a bidding model to complete trades. The second type of DEX is a liquidity pool-based exchange, which completes trades through automated market makers. The algorithm behind a liquidity pool-based DEX is called an Automated Market Maker (AMM). For example, Uniswap uses an automated market maker model that allows everyone to provide liquidity to the exchange to earn a fee for Uniswap. The fee a user earns for providing liquidity on Uniswap is the share they earn from trading activity on Uniswap.

DEX decentralized exchanges are an important part of the DeFi ecosystem. The role of centralized exchanges (CEX) in the DeFi ecosystem is equivalent to that of the entire cryptocurrency market. Although DEX has the characteristics of complete decentralization, transparency and openness, it also has the disadvantages of low trading efficiency and a relatively small user scale.

At present, the more commonly used DEX include , Uniswap, PancakeSwap, MDEX, JustSwap, and SushiSwap, among others.