![]() It’s a much different model compared to centralized exchanges, where the exchange keeps 100% of trading fees. In general, the bulk of earnings typically goes to the liquidity providers, who are just traders like the rest of us. The exchange or treasury keeps the spare change. In other cases, like limit orders on CoW Swap, the trade executes with a small price buffer. If the community votes for the DEX to keep a percentage of fees, the developers make it happen. The 0.3% fee collected on Uniswap goes to the liquidity providers.īy contrast, Alium Finance takes a sliver of the fees for the treasury.ĭEXs work on a governance model, meaning that people who hold governance tokens can vote on future changes to the DEX. For example, Uniswap doesn’t take a cut of fees. Some DEXs take a cut of the fees collected on the platform-but not all DEXs. Your tokens never leave your comfy crypto wallet until you confirm the swap in your wallet.Īnother benefit: DEXs have hard–to–find tokens that haven’t made it onto major exchanges yet. That’s less than you’ll pay to trade on Coinbase, and you don’t have to move your tokens onto a third-party platform to trade. Uniswap, the top DEX by volume, charges a 0.3% fee on swaps. Some DEXs take a cut of the swap fees generated by the DEX, with the bulk of earnings going to the liquidity providers. Without a pool, there’s nothing to trade, and what fun is that? Liquidity providers are key to the system. Liquidity just means the ability to trade. Where do these pool tokens come from? Well, they come from other traders who want to earn a yield by providing liquidity to the pool. If you had ETH and wanted to buy GMX, you could swap your ETH for GMX and vice versa. ![]() Sometimes the pool holds just two types of crypto, like ETH and GMX, or sometimes they hold several types of tokens. A DEX holds a pool of tokens that traders can swap. ![]()
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