How To Carry Out Your First Ever Swap In A DEX
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By now, you must have heard of the terms “swap” and “DEX” in the crypto scene.
Perhaps you are confused and even intimidated by all these terminologies, and what’s more is that there’s so much money flowing in and out of the market.
As if trading alone wasn’t confusing enough right?
Let’s just get to it as we help clear the air for you.
What is DEX?
DEX is short for Decentralized Exchange.
DEXs are built on Smart Contracts. Each DEX has a series of contracts for different trading pools. Each of these pools is an Automated Market Maker.
People looking to passively generate income from their tokens can become liquidity providers (LPs) at decentralized exchanges. This means they put their own tokens into the DEX contracts and let people trade between them. When someone makes a trade, the pool gets to keep a small percentage as a fee.
What is a swap?
A swap is just that, a swap.
For example you like to swap a portion of your ethereum to USDT which you hold in your wallet. You will be using Uniswap where you are swapping it with the liquidity pool which has been set up by the liquidity providers.
That’s it.
A happy, private flea market
So look at it this way: Traders can go to a flea market and swap whatever goods they want. As long as there is already a liquidity pool set up for the items they want to swap they will be able to do it with no involvement of any other person.
The flea market is the DEX. The ultimate freedom is shopping for yourself. You get what you see.
(Using similar analogy, a Centralized Exchange would be your mainstream supermarket franchise. It is run by a private company or your government and you pay with cash, including premiums or fees set by them.)
How to carry out your first ever swap in a DEX
So you ready to do some independent shopping at a flea market?
Swap is the main function of a DEX, so let’s just focus on that.
Google and search for a DEX. Popular, reputable ones today include Sushiswap and Uniswap.
Connect your self-custody wallet [link to how to create a self-custody wallet article] to the DEX.
Choose the cryptocurrency you want to swap for.
Execute the swap.
You are done! You now have your new cryptocurrency in your wallet.
Yes, this is a general and straight-forward guide. There are many DEXs out there with their own interface and intricacies which may or may not make things easier for you.
Jan 27, 2024
