Decentralized Exchange Tutorial

Decentralized exchanges (DEX) represent the future of finance - no intermediaries, global access, complete transparency. This tutorial will teach you how to safely trade tokenized stocks on DEX.

🎯 Why Choose Decentralized Exchanges?

Core Advantages:

• 🔓 Permissionless: No KYC required, anyone can use
• 🔐 Self-Custody: Private keys in your hands, complete fund control
• 🌍 Global Access: No geographical restrictions
• 🔍 Complete Transparency: All transactions public on blockchain
• 🚫 Censorship Resistant: Cannot be shut down by single entity
• 💰 More Opportunities: Participate in liquidity mining, staking and other DeFi activities

Suitable For:

• 🔰 Users wanting to experience DeFi
• 🌍 Users restricted from using CEX due to geography
• 🔒 Users valuing privacy and fund autonomy
• 💡 Users wanting to participate in more DeFi protocols

Considerations:

• Requires some technical knowledge
• Self-responsibility for security
• Gas fees to consider
• Liquidity may be lower than CEX

🏗️ DEX Infrastructure

Automated Market Makers (AMM)

Traditional Order Book vs AMM:

Feature	Order Book	AMM
Price Discovery	Buyer/seller quotes	Algorithmic formula
Liquidity	Market makers provide	Liquidity pools
Slippage	Order book depth determines	Trade volume and pool size determine
24/7 Trading	Requires market makers online	Runs automatically

How AMM Works:

1. Users deposit token pairs into liquidity pools (e.g., ETH/USDC)
2. Smart contracts use mathematical formulas for pricing
3. Traders trade with pools, not other users
4. Liquidity providers earn trading fee shares

Common AMM Formulas

Constant Product (Uniswap V2)

x * y = k

• x, y: Quantities of two tokens in pool
• k: Constant value
• Features: Simple and reliable, but high slippage for large trades

Stablecoin AMM (Curve)

A * n^n * Σxi + D = A * D * n^n + D^(n+1) / (n^n * Πxi)

• Suitable for similar value assets (like stablecoins)
• Lower slippage

Concentrated Liquidity (Uniswap V3)

• Liquidity providers can choose price ranges
• Higher capital efficiency
• More complex management

🌐 Major DEX Platform Comparison

Ethereum Ecosystem

Uniswap ⭐⭐⭐⭐⭐

Basic Information:

• Launch: 2018
• Total Value Locked: $3B+
• Daily Volume: $1B+
• Supported Networks: Ethereum, Polygon, Arbitrum, Optimism

Features:

• Largest DEX with best liquidity
• Supports most tokenized stocks
• User-friendly interface
• Active community, continuous development

Fees:

• Trading fee: 0.3% (V2) / 0.05%-1% (V3)
• Gas fee: $15-50 (Ethereum mainnet)

Tokenized Stocks:

• Supports Backed Finance tokens (bAAPL, bTSLA, etc.)
• Supports Synthetix synthetic stocks
• Good liquidity

SushiSwap ⭐⭐⭐⭐

Basic Information:

• Launch: 2020
• Features: Uniswap fork with token incentives
• Multi-chain deployment: 20+ chains

Advantages:

• Liquidity mining rewards
• Multi-chain support
• Additional features (lending, options, etc.)

Disadvantages:

• Lower liquidity than Uniswap
• High token price volatility

Solana Ecosystem

Jupiter ⭐⭐⭐⭐⭐

Basic Information:

• Type: DEX aggregator
• Features: Aggregates all DEXs on Solana
• Advantage: Best price routing

Core Functions:

• Smart routing: Automatically finds best trading paths
• Price comparison: Compares all DEX prices
• MEV protection: Prevents front-running
• Limit orders: Supports advanced order types

Fees:

• Platform fee: 0.25%
• Gas fee: ~$0.001
• Total cost: Much lower than Ethereum

Raydium ⭐⭐⭐⭐

Basic Information:

• Type: AMM + order book hybrid
• Features: Integrated with Serum order book
• Advantage: Better price discovery

Special Features:

• Liquidity mining
• IDO platform
• Futures trading

Other Important DEXs

PancakeSwap (BSC) ⭐⭐⭐

• Largest DEX on Binance Smart Chain
• Extremely low fees (~$0.1)
• Limited tokenized stock support

TraderJoe (Avalanche) ⭐⭐⭐

• Main DEX in Avalanche ecosystem
• Innovative Liquidity Book
• Low fees, fast speed

🔧 Wallet Setup and Preparation

Choose the Right Wallet

MetaMask (Ethereum Ecosystem)

Installation Steps:

1. Visit metamask.io
2. Download browser extension or mobile app
3. Create new wallet or import existing wallet
4. Safely backup seed phrase

Network Configuration:

Ethereum Mainnet:

• Network Name: Ethereum Mainnet
• RPC URL: https://mainnet.infura.io/v3/YOUR_KEY
• Chain ID: 1
• Symbol: ETH

Polygon:

• Network Name: Polygon Mainnet
• RPC URL: https://polygon-rpc.com
• Chain ID: 137
• Symbol: MATIC

Phantom (Solana Ecosystem)

Installation Steps:

1. Visit phantom.app
2. Download browser extension
3. Create new wallet
4. Backup seed phrase

Features:

• Designed specifically for Solana
• Excellent user experience
• Supports NFT and DeFi

📱 Uniswap Trading Tutorial

Step 1: Connect Wallet

1. Visit app.uniswap.org
2. Click "Connect Wallet"
3. Select MetaMask
4. Authorize connection
5. Confirm network (Ethereum/Polygon, etc.)

Step 2: Prepare Funds

Need to Prepare:

• Trading tokens (like USDC)
• Gas fee tokens (ETH/MATIC, etc.)

Ways to Get Tokens:

• Withdraw from CEX to wallet
• Use fiat on-ramp services
• Transfer from other wallets

Step 3: Execute Trade

1. Select Token Pair:

   • From: Choose payment token (like USDC)
   • To: Choose target token (like bAAPL)

2. Enter Amount:

   • Input amount to swap
   • View estimated tokens to receive
   • Note slippage settings

3. Check Trade Details:

   • Exchange rate
   • Slippage tolerance
   • Gas fee estimate
   • Minimum received amount

4. Confirm Trade:

   • Click "Swap"
   • Confirm in MetaMask
   • Wait for transaction confirmation

Step 4: Trade Management

View Transactions:

• Check token balance in wallet
• View transaction details on blockchain explorer
• Save transaction records for tax purposes

🚀 Jupiter Trading Tutorial

Step 1: Connect Phantom Wallet

1. Visit jup.ag
2. Click "Connect Wallet"
3. Select Phantom
4. Authorize connection

Step 2: Smart Routing Trade

1. Select Tokens:

   • Input token: USDC
   • Output token: Search for tokenized stocks

2. Compare Routes:

   • Jupiter automatically shows best route
   • Compare prices across different DEXs
   • View price impact

3. Execute Trade:

   • Set slippage tolerance
   • Click "Swap"
   • Confirm in Phantom

Advanced Features

Limit Orders:

• Set target price
• Automatic trade execution
• No need for continuous monitoring

DCA (Dollar Cost Averaging):

• Set up regular purchases
• Spread timing risk
• Automated investing

💡 DEX Trading Tips

Reduce Costs

1. Choose Right Timing:

   • Avoid network congestion periods
   • Monitor gas fee trackers
   • Use Layer 2 solutions

2. Optimize Slippage Settings:

   • High liquidity tokens: 0.1%-0.5%
   • Low liquidity tokens: 1%-3%
   • Avoid setting too low causing trade failures

3. Batch Operations:

   • Complete multiple operations at once
   • Reduce gas fee expenses
   • Use aggregator services

Security Protection

1. Verify Token Contracts:

   • Check token contract addresses
   • Use official token lists
   • Beware of fake tokens

2. Authorization Management:

   • Regularly check token approvals
   • Revoke unnecessary approvals
   • Use limited approvals

3. Transaction Confirmation:

   • Carefully check transaction details
   • Confirm receiving addresses
   • Pay attention to slippage and fees

⚠️ Risk Warnings

Technical Risks

• Smart Contract Risk: Code vulnerabilities may cause fund loss
• Impermanent Loss: Price risk when providing liquidity
• Front-running: MEV bots may affect trade prices

Operational Risks

• Private Key Security: Lost private keys mean unrecoverable funds
• Phishing Sites: Ensure visiting official websites
• Authorization Risk: Malicious contracts may steal funds

Market Risks

• Liquidity Risk: Small tokens may be difficult to trade
• Price Slippage: Large trades may impact prices
• Regulatory Risk: Policy changes may affect DEX usage

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Summary: DEX provides unprecedented financial freedom for users, but also requires taking on more responsibility. It's recommended to start with small amounts, gradually familiarize yourself with the operation process, and always put security first. As technology develops, DEX user experience will continue to improve and costs will further decrease.