Types of DEXs

The type of a DEX, depends on the mechanisms used to settles the trades. The three main types of Decentralized Exchanges (DEXs) are:

1. Automated Market Makers (AMMs): These platforms use liquidity pools where users can swap tokens. Prices are determined by a mathematical formula based on the supply and demand of the tokens in the pool.

2. Order Books DEXs: These exchanges operate similarly to traditional stock exchanges, where buy and sell orders are listed in an order book. Trades are made when the prices match.

3. DEX Aggregators: These services scan multiple DEXs to find the best trading prices and combine liquidity from various sources to facilitate a trade at the most favourable terms.

The main differences lie in how they facilitate trades and provide liquidity. AMMs rely heavily on liquidity pools and complex formulas to set prices, order books use a traditional system of matching buy and sell orders, and aggregators optimize trades across multiple DEXs to ensure the best possible deal for users.