Crypto Glossary
Hello Myners! Here are some more cryptocurrency terms for this week. Recently we uploaded some articles on Defi and DEX and this will help you to expand your knowledge.
What is DEX?
A decentralized exchange (or DEX) is a peer-to-peer marketplace where cryptocurrency traders can transact directly with one another. DEXs enable one of crypto’s most important features: facilitating financial transactions that aren’t served by banks, brokers, or other third parties. Many popular DEXs, such as Uniswap and Sushiwap, run on the Ethereum blockchain and are part of a growing suite of decentralized finance (DeFi) tools that allow users to access a wide range of financial services directly from a compatible crypto wallet. A decentralized exchange facilitates trade between individuals by using smart contracts (automatically executed protocols), but it does not take control of their currency. DEXs, unlike centralized exchanges, do not allow for fiat-to-crypto conversions; instead, they swap cryptocurrency tokens for cryptocurrency tokens.
What is a DEX aggregator?
There are two sorts of cryptocurrency exchanges: centralized and decentralized. DEX aggregators act as a centralized explorer for decentralized exchange pricing and liquidity (DEXs). DEX aggregators have become a sought-after service as the popularity of cryptocurrencies has grown, as has the use of decentralized exchanges.
Pricing on decentralized exchanges varies, and it’s not always straightforward to discover the best bargain for the trading pair you’re interested in. Not only that, but DEXs are becoming increasingly popular among crypto investors since they provide enhanced security and a better fit with a cryptocurrency’s inherent qualities. However, as interest in cryptocurrency grows, more DEXs enter the market, making it difficult for investors to locate the greatest liquidity and pricing. DEX aggregators are useful in this situation. While investors can browse through many exchanges with little success, DEX aggregators use intricate algorithms to find the best feasible supplier for a given token swap by taking into account numerous parameters.
Comparing a DEX aggregator to a search engine is the clearest way to understand what it does. Imagine a service like Google Flights, where you can obtain aggregated information from multiple airlines and choose the best offer for you. DEX aggregators work similarly. They gather information from a variety of decentralized exchanges and support split trades to provide the best possible prices. Furthermore, DEX aggregators do several computations and allow customers to execute split trades in order to obtain the best possible swap price. In essence, crypto traders are unable to achieve this conclusion because DEX aggregators execute incredibly complex computations in seconds.
What is Defi?
DeFi (short for “decentralized finance”) refers to financial services provided by public blockchains, most notably Ethereum. You can earn interest, borrow, lend, purchase insurance, trade derivatives, exchange assets, and more with DeFi, but it’s faster and doesn’t involve paperwork or a third party. DeFi is global, peer-to-peer (directly between two people, not through a centralized system), pseudonymous, and available to anyone, just like crypto in general.
By allowing people, merchants, and corporations to perform financial transactions using developing technologies, decentralized finance eliminates intermediaries. Peer-to-peer financial networks that use security protocols, connectivity, software, and hardware developments are used to achieve this.
You can lend, trade, and borrow using software that records and validates financial transactions in distributed financial databases from anywhere you have an internet connection. A distributed database is accessible from multiple locations; it collects and aggregates data from all users and verifies it with the help of a consensus process.
Decentralized finance uses this technology to abolish centralized finance models by allowing anybody, regardless of who or where they are, to access financial services.
