As a decentralized exchange, DEX does not require a third-party intermediary and is the core of DeFi. From Uniswap's detonation of liquidity mining to the EU MiCA Act's strict control of anonymous transactions, DEX has repeatedly played a game between compliance and technology. The XBIT decentralized exchange platform launched the "on-chain fuse" mechanism, freezing transactions and initiating community voting when prices fluctuate violently, trying to replace human intervention with code rules, while ensuring safety and compliance, bringing users a new trading experience, and becoming a new focus in the DEX field.

What is DEX: Concept Analysis and International Trends?

What is DEX? Simply put, it is an exchange that focuses on peer-to-peer trading of cryptocurrencies and digital assets. Unlike centralized exchanges, it does not require a trusted third party to facilitate asset exchange.

Its soul lies in "my key, my coin" - even if the platform goes bankrupt, the assets are still in the hands of users. This model was initially ridiculed as a "toy" due to its slow transaction speed and poor liquidity, but Uniswap's automatic market maker (AMM) mechanism has allowed DEX to counterattack. Today, the global average daily transaction volume of DEX has exceeded 10 billion US dollars. The XBIT decentralized trading platform has been upgraded on this basis, allowing users to use NFT as collateral for market making, so that digital collections can also earn transaction fees.

 How does DEX work?

AMM has played an indispensable role in the development of DEX. Before the emergence of AMM, DEX faced liquidity problems, slow transactions, and premiums on crypto assets. AMM solves these problems by incentivizing the creation of liquidity pools and using algorithmic trading. Those who add liquidity to DEX can get a share of the fees. The trading algorithm determines the price based on the remaining amount of the two assets, and the two assets are not paired in real time.

The XBIT decentralized exchange platform has added a "safety lock" to this set of rules. When it detects that the trading volume of a certain token has surged by 50% within 10 minutes, it will automatically suspend trading and let the coin holders vote on whether to resume trading, to prevent robots from dumping the market.

DEX's core advantages and risks

The biggest charm of DEX is that it is “unstoppable” - no ID card is required, no need to worry about account closure; North Korean users can also trade with Americans. There is no threshold for new coins to be launched. The MEME coin was born in the early morning and can be traded in the morning.

But this freedom also comes with hidden dangers: fake currency traps are everywhere, and a spelling error (such as typing USDC as USDT) may make your assets go to zero; smart contract loopholes are like time bombs. Last year, a DEX was emptied of $200 million by hackers due to a code error. DEX tried to deal with it with "community virus detection" - 100 people are required to pledge and guarantee the new currency, and if the project runs away, the guarantor's deposit will be confiscated to compensate the victims.

 What are DEX and its latest developments?

Currently, the DEX world is divided into three parts: Uniswap sits firmly on the throne with its first-mover advantage, PancakeSwap attracts newbies with its cute style, and dYdX specializes in high-leverage contracts. New players such as XBIT have taken a different approach and launched the "social trading" function - you can watch the big guys operate like watching TikTok and follow orders with one click. Recently, they have also tried "cross-chain lightning transactions", which directly exchange between Bitcoin and Dogecoin, eliminating the problem of multiple cross-chain bridges.

However, DEXs are facing a regulatory crackdown. The EU requires tracking of all large anonymous transactions. DEX has developed a "compliance model" to automatically hide high-risk currencies from European users.

The paradox of DEX is that the more decentralized it is, the harder it is to use; the more user-friendly it is, the more centralized it is. Although the circuit breaker mechanism of the XBIT decentralized exchange platform protects novices, community voting takes time and may miss the best trading opportunity. However, when Binance and Coinbase delisted countless tokens due to regulatory tightening, DEX was still the "free port" of the crypto world.