Decentralized Exchanges (DEX): Principles, Risks, and Opportunities

The crypto market is evolving rapidly, and more users are choosing platforms where they can fully control their funds. Decentralized exchanges (DEX) allow you to swap cryptocurrency directly between wallets without intermediaries. Unlike centralized venues where operations go through the exchange itself, on a DEX asset management and trade confirmation remain with the user.

In this article you will learn:

• what a decentralized exchange is and how a DEX works;
• how liquidity pools, LP tokens, and the swap mechanics are designed;
• which DEX risks to consider and how to minimize them;
• what DEX fees consist of and how to reduce TRON fees by renting TRON Energy;
• how to choose a decentralized exchange and protect your wallet.

According to DefiLlama (June 2025), combined trading volume on DEXes exceeds $110B per month, whereas in 2020 it did not reach $5B — growth of more than 20x. A Messari report shows that about 32% of active traders have used decentralized protocols at least once.

A decentralized exchange (DEX) is a venue where users execute peer-to-peer crypto swaps directly, without intermediaries and without registration. There are no accounts or custodial vaults: funds remain in users’ wallets, and trades are executed by contract code.

All DEX logic is built on smart contracts. A user connects a wallet (for example, TronLink, MetaMask, or Klever), selects tokens, enters the amount, and confirms the operation. The contract performs the swap and records the transaction on the blockchain.

A DEX does not require KYC and does not control data — everything happens on-chain. The core principle is “Your keys — your crypto.” The wallet owner always retains full control over their funds.

A decentralized exchange operates through direct interaction between users. Trades occur in a peer-to-peer format, and execution is controlled by a smart contract that automatically performs the swap and records it on the blockchain.

Instead of a classic order book, a DEX uses an automated market maker model. This algorithm calculates token prices depending on their ratio in a liquidity pool. The more of one token the pool holds, the lower its price relative to the second asset. This keeps the system balanced and enables swaps without brokers and operators.

Liquidity pools are formed by users who deposit two cryptocurrencies of equal value, for example TRX and USDT. These assets become available for trading and create a shared liquidity fund from which all swaps are executed. In return, participants receive a share of the fees traders pay on swaps.

After adding funds to a pool, a liquidity provider receives LP tokens. They confirm the participant’s share in the pool and grant the right to withdraw the deposited assets together with accrued fees. LP tokens can be redeemed at any time via the same contract in which they were minted.

Each swap is a contract call. The user sends one token to the pool and receives another at the current rate. The AMM algorithm maintains balance with the formula x × y = k, where the product of token reserves remains constant. The average fee for such trades usually ranges from 0.1% to 0.3% and is distributed among all liquidity providers.

That is how a modern DEX works: it ensures sustainable liquidity without intermediaries, and the swap rules are set by smart contract code. The system does not depend on a single company, and every user can verify the transparency of all processes.

There are several types of DEXes that differ by trading mechanism and level of automation:

• AMM platforms — (Uniswap, PancakeSwap, SunSwap). Use an automated pricing algorithm.
• Order book DEXes — (dYdX, Serum). Similar to classic exchanges, allow placing limit orders.
• DEX aggregators — (1inch, OpenOcean, Matcha). Aggregate liquidity across venues to find the best rate.

According to Kaiko (April 2025), 85% of DEX volume comes from the AMM model. It is simpler, faster, and more reliable for most users.

The main advantage of decentralized platforms is full control over funds. There are no custodians, operators, or intermediaries: just the user and the code.

Additional benefits:

• No registration and no KYC. You can start trading in a couple of clicks.
• Direct wallet connection. Linking a wallet to a DEX (TronLink, MetaMask) provides instant access to DeFi.
• Transparency. All transactions are visible on the blockchain.
• Rare tokens. Many projects launch on DEXes first and only later list on centralized exchanges.

Thanks to privacy and the absence of restrictions, DEXes have become popular in countries with limited access to CEX and among users who value independence.

Decentralization gives freedom but requires responsibility. The main DEX risks are tied to user mistakes and contract vulnerabilities.

• Smart contract bugs, hacks, and rug pulls.
• Fake tokens and clones of popular coins.
• High DEX fees during network peak periods.
• Slippage — the price difference at execution.
• No support desk: an error = loss of funds.

According to Chainalysis (December 2024), 37% of all incidents in DeFi are related specifically to DEX platforms.

To reduce risks, practice safe methods:

• set an approve limit for each token;
• use a separate “trading” wallet for DEX operations;
• disable automatic confirmations in your wallet;
• verify the router contract address on the DEX website before swapping;
• set slippage ≤1–2% for liquid pairs.

These simple steps protect assets from most loss scenarios and make DeFi trading as safe as possible.

The token swap process is simple and fully automated:

1. Connect a wallet → select a token pair.
2. Enter the amount and confirm the transaction.
3. Contract call → swap → record on the blockchain.

Each transaction requires a network fee, for example:

• TRON — TRX (via Energy and Bandwidth);
• Ethereum — gas in ETH;
• BNB Chain — fee in BNB.

A DEX does not charge a service fee, but every trade includes a trading fee that is distributed among liquidity providers. The network fee is paid separately and goes to the blockchain that executes the transaction.6

Because the TRON network is not compatible with EVM platforms (such as Ethereum or BNB Chain), the USDT TRC-20 token is traded only on DEX platforms that operate directly within the TRON ecosystem. Classic DeFi exchanges like Uniswap or PancakeSwap do not support this standard — they handle USDT versions in ERC-20 and BEP-20 formats.

All these platforms use the same model: swaps occur via a TRC-20 smart contract, and the network fee is paid in TRX.

Every operation on the TRON network — whether a USDT TRC-20 transfer or a swap on a DEX — consumes internal blockchain resources: Energy and Bandwidth.

If a wallet lacks sufficient resources, the fee is deducted in TRX, as most crypto investors are used to. With active trading, this can add up to noticeable amounts.

To reduce costs, advanced traders use TRON Energy rental. This does not affect security and does not require locking TRX — part of the network costs is covered by pre-rented internal blockchain resources (Tron Energy).

For example, via the Tron Pool Energy service you can rent energy for the required volume of operations and thus save up to 60–65% on swap and transfer fees. This approach is especially convenient for DEX users who perform dozens of transactions per month.

Before connecting a wallet, make sure the platform is reliable.

Check:

• smart contract audits (CertiK, SlowMist, PeckShield);
• liquidity (TVL);
• domain authenticity and SSL certificate;
• developer activity and reputation in the community.

Within the TRON ecosystem, SunSwap and JustMoney are considered safe — both undergo independent audits and publish open-source code.

Any DEX requests permission to use your tokens. You can check them in blockchain explorers:

• Tronscan → Wallet → Approvals — for TRON;
• Etherscan → Token Approvals — for Ethereum;
• BscScan → Token Approvals — for BNB Chain.

If you find an unknown contract, click Revoke. Regular revoke approvals are a key part of DeFi security.

Even the most reliable decentralized exchanges cannot protect against inattention. On a DEX, no one can cancel a transaction or return tokens — the entire responsibility lies with the user. Therefore, DeFi security starts with simple rules.

• Verify the website and token contract address.
• Connect your wallet only to official platforms.
• Do not sign transactions if you are not sure you understand them.
• Store seed phrases offline only, without screenshots and clouds.
• Use hardware wallets to store large amounts.

On decentralized platforms, security depends not on the exchange but on the user’s attentiveness. But these basic habits really help preserve assets in any situation.

DEX = control, transparency, and privacy in crypto. It’s a trading format without intermediaries where everyone manages their funds independently.

Decentralized exchanges are suitable for experienced users and DeFi investors who are ready for self-custody. Beginners should start with small amounts and proven protocols.

In the next article, we will compare DEX and CEX and break down which model fits you best — centralized with support and liquidity or decentralized with full control and independence.