What is DeFi Trading?

June 07, 2024


DeFi Trading uses decentralized exchanges like Uniswap and PancakeSwap to trade cryptocurrencies directly, offering user control, lower fees, and additional features like yield farming and staking.

2 min. read

2 min. read

2 min. read

DeFi Trading is the process of buying and selling cryptocurrencies directly with other users on decentralized exchanges (DEXes). Unlike traditional exchanges, DEXes don't rely on a central authority like a bank or brokerage. Instead, they use blockchain technology and smart contracts to facilitate trades automatically and securely. This means you have more control over your funds, and transactions are not controlled by a central authority. 

Popular platforms for DeFi Trading include Uniswap and PancakeSwap. These platforms use automated systems to match buyers and sellers, allowing users to trade a wide variety of cryptocurrencies directly from their digital wallets. By trading on DEXes, users can avoid many of the fees and restrictions imposed by traditional exchanges, making the trading process more efficient and accessible.

Some Examples of DEXes for DeFi Trading 

Uniswap is currently the largest decentralized exchange that operates on the Ethereum blockchain. It uses an Automated Market Maker (AMM) system where users trade against liquidity pools. These pools are created by users who deposit their cryptocurrencies into the pool and, in return, earn a share of the trading fees. Uniswap allows for the trading of a wide variety of tokens directly from your digital wallet, providing a user-controlled trading experience.

PancakeSwap is another decentralized exchange that works similarly to Uniswap but is based on the Binance Smart Chain. It also uses an AMM model. They are known for their lower transaction fees and faster processing times compared to Ethereum-based DEXes. PancakeSwap also offers yield farming, staking, and lottery features, providing users with opportunities to earn rewards.

Disclaimer: The information provided in this research paper is for educational and informational purposes only. It does not constitute financial advice, investment guidance, or any solicitation to buy or sell financial instruments. The views expressed herein are those of the authors and do not necessarily reflect the opinions of Kollectiv.