Chapter 6
Decentralized Exchanges and Marketplaces
IN THIS CHAPTER
Comparing DEXs and CEXs
Explaining the role of liquidity providers and traditional order books
Introducing automated market makers
Exploring other types of decentralized exchanges
Whether you want to sell a car or a share of Microsoft stock, marketplaces exist to provide an organized way to gather and match those who want to sell with others who want to buy. Liquidity refers to the ability to quickly buy or sell at a fair price.
For instance, cars are relatively illiquid items. You would certainly find an immediate buyer for your car if you offered it at $1, but that’s not a desirable sale price for you. On the other hand, Microsoft stock, which sees an average daily volume of 30 million shares (a measure of how many times the stock is bought and sold throughout the trading day), is highly liquid.
Liquidity in a marketplace is not just beneficial to those who want to immediately buy or sell a given asset. Active markets provide ongoing updates as to what an asset is worth. Although the value of your car fluctuates ...
Get DeFi For Dummies now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
