How to Properly Use a Decentralized Cryptocurrency Exchange (DEX)

I. A Simple Understanding of Decentralized Cryptocurrency Exchanges (DEX)

Imagine a traditional exchange (such as a stock exchange) where a bank or a company holds your money and facilitates transactions for you, whereas a **Decentralized Exchange (DEX)** is like a "vending machine". Instead of handing over your assets to someone else for safekeeping, you trade directly with other users through a program (smart contract) on the blockchain and are in control of your assets the entire time.

Its core feature:

control the money oneself: The private key and assets are always in your hands, with no fear of the platform running away or being hacked.
Transparent and fair: All transaction records are public on the blockchain, accessible to anyone and impossible to fake.
No identity required: You don't need to upload your ID, you can use it when you are connected to the Internet, and it works globally.
Automatic pricing: Most DEXs use a "liquidity pool" (a bunch of tokens deposited by users) to automatically calculate prices instead of placing orders manually.

Compared to traditional centralized exchanges such as Coin, DEX is more secure and private, but trading may be slower and price volatility may be greater.

Second, what are the common decentralized exchanges (DEX)?

Uniswap (best known)
- Main: Anyone is free to shelve new coins and trade ETH and ERC-20 tokens (such as the on-chain version of Dogcoin).
- How it works: connect to your wallet, select coins to exchange, and automatically calculate the price according to the funds in the pool.
SushiSwap (community-driven version of Uniswap)
- Features: Transaction fees are distributed to holders of the platform token SUSHI, encouraging users to participate in governance.
Curve (Stablecoin specific)
- Suitable scenario: trading stable coins such as USDT, USDC, etc. with low price fluctuations and low commission.
PancakeSwap (DEX on the CoinAnchor chain)
- Advantage: based on CoinSmart Chain (BSC), fast transaction speed, cheap commission (suitable for small transactions).
1inch (price comparison tool)
- Function: Automatically compare the prices of multiple DEX to help you find the optimal exchange path.
Simpleswap

III. Hands-on with decentralized exchanges (DEX) (using Uniswap as an example)

Step 1: Prepare a wallet

Install a blockchain wallet (like the MetaMask Little Fox wallet), create an account and back up the helper word (if you lose it, you lose money!) .
Fill your wallet with some ETH as a fee (Gas fee), or fill it with the tokens you want to exchange.

Step 2: Connect to the exchange

Open the Uniswap website (check the URL to prevent phishing!). Click "Connect Wallet" to connect your wallet.

Step 3: Select Coin Exchange

Enter the currency you want to exchange (e.g. ETH for USDC) and the system will automatically display how much can be exchanged.
Pay attention to the "slippage" (tolerance for price fluctuations) and set it high to avoid losing trades (especially in volatile markets).

Step 4: Confirmation of the transaction

Check the commission and miner's fee (Gas fee), tap "Confirm" and sign the wallet.
Wait a few minutes and the transaction will be uplinked and completed, with the tokens automatically arriving in your wallet.

Tip:

Liquidity pools earn fees: if you deposit two coins of equal value into a pool (such as ETH and USDC), you get a share of the fees that others pay when they trade.
Experiencing a transaction jam? Increase the Gas fee appropriately or try again later.

IV. Decentralized Exchange (DEX) Advantages and Disadvantages

✅ Advantages

Absolute control: your coins are always in your own wallet, with no fear of the exchange going down.
Freedom of anonymity: no KYC, globally available.
New coins are fast: any project can be shelved directly without waiting for review.

❌ Disadvantages

Complicated operation: you have to manage your own wallet, Gas fees, newbies are easily confused.
Prices can take a loss: when the pool is low, large trades can drive up the price (large slippage).
Expensive and slow when the chain is clogged: when the Ethernet network is busy, for example, fees can soar to tens of dollars.

V. Will the future be better?

cross-chain transaction: Many DEXs now support token swaps across different chains (e.g. bitcoin for tokens on ethereum).
speed up and reduce fees: New chains (e.g. Solana) and Layer2 solutions (e.g. Arbitrum) make transactions faster and fees lower.
More user-friendly interface: More and more DEXs are beginning to simplify operations and approach the traditional exchange experience.

in a word: DEX is suitable for users who value security and privacy and are willing to spend some time learning the operation. If you are a high-frequency trader or a complete novice, it may still be more convenient to have a centralized exchange.

(Little reminder: first time users are advised to test the waters in small amounts to familiarize themselves with the process!)