Let’s dive into the evolution of DEXes as we explore the shift from automated market makers (AMMs) to the time-tested order book model. We must understand the inherent advantages and challenges of each approach, and discover how UTXO-based blockchains can reshape the trading landscape and bridge the gap between traditional finance and the dynamic world of crypto.
Quick takes
- DEXes address centralized exchange challenges, but centralized platforms still offer superior trading functionalities not found in Web3.
- The AMM model revolutionized DeFi but comes with limitations like impermanent loss and slippage.
- Order book models offer transparent price discovery and are highly compatible with UTXO-based blockchains.
- The crypto landscape is shifting from AMM-based DEXes to order book structures, bridging centralized and decentralized trading.
The emergence of DEXes: Addressing centralized exchange limitations
Decentralized exchanges (DEXes) have risen as alternatives to the challenges presented by centralized exchanges, which include vulnerabilities to hacks, obligatory KYC verifications, opaque account management and control over private keys. Yet, centralized platforms play an indispensable role, serving as gateways for beginners into the cryptocurrency…
