This article looks at how the DEX landscape has changed since its early days.

DEXes are vital for decentralized finance operations.

Cryptocurrency trading platforms that let users trade permissionlessly and peer-to-peer have revolutionized the cryptocurrency industry.

Although contemporary DEXes boast a plethora of features and are straightforward for users, they have progressed tremendously since their early days.

DEXes have come a long way in recent years, and here’s a look at how they’ve progressed.

Decentralized exchanges first arose in 2016.

Around this time, platforms such as IDEX, EtherDelta, and ForkDelta began to crop up. These allowed users to trade cryptocurrencies with one another directly, reducing the need for OTC groups and eliminating the need for trust between parties.

However, these first-generation platforms had the same problems:

Slow, clunky UX

Limited liquidity

Partially centralized order books

Although non-custodial, many first-generation DEXes weren’t entirely decentralized and could be better classified as hybrid platforms. Consequently, they were more likely to regulatory attacks, leaving some platforms with no choice but to restrict IPs from particular regions and put into place KYC/AML policies.

The main issue, however, was their complicated user interfaces that most often needed users to transfer their tokens to the smart contracts of the platform or set up an account merely to establish limit orders. To make matters worse, the platforms were very slow too which made it challenging to trade without any hitches.

Automated market maker (AMM) exchanges have adapted and evolved to address the issues that first-generation DEXes struggled with.

The DEX space began rapidly gaining popularity in November 2018 with the release of the first major AMM, Uniswap.

This platform totally changed how people think about peer-to-peer trading by introducing decentralized liquidity pools and pricing curves.

Uniswap allowed users to deposit their assets into two-sided liquidity pools that determined the relative value of each asset by using a mathematical formula (most likely the constant product formula). Not only did this help with the liquidity problem, but Uniswap also efficiently priced newer and more speculative assets. This helped create an explosion of ERC-20 assets.

AMM became quickly popular after its development and is now employed by the great majority of decentralized exchanges. In contrast, only a small number can be considered order book DEXes. Many well-known DeFiblockchains have their own AMMs(or various types), which can be seen as Uniswap clones or offshoots. A few examples are PancakeSwap DEX (connected to BNB Chain), SpiritSwap (for Fantom network usage), and Pangolin (offshoot of Avalanche).

DEXes, or decentralized exchanges, have become popular among cryptocurrency investors for their ability to trade assets without the need for a third party. Most DEXes also offer additional features such as yield farms, decentralized lending services and launchpads.

The introduction of these new features not only resulted in a higher yield, but also opened up decentralized lending protocols like Euler and revenue-sharing permissionless liquidity pools. This allowed users to get the most out of their capital.

The majority of decentralized exchanges today don’t favor any particular asset, meaning that users can trade whatever they want as long as there’s a corresponding liquidity pool.

Recently, a new generation of DEXes has surfaced that are more platform-specific. These platforms usually have one purpose and allow users to trade aLimited number of assets within the ecosystem.

Named after the Japanese Sword, Katana is a DEX built on Ronin Chain that’s available to Axie Infinity users. It lets them trade in-house assets such as Smooth Love Potion (SLP) and AXS for other popular cryptocurrencies like Ronin (RON) and USD Coin (USDC).

XCAD Network is also developing a DEX focused on creator tokens. Users of the platform will be able to trade various permissionless creator tokens against stablecoins, providing a closed trading atmosphere for XCAD users.

Although some DApps boast millions of active users, platform-specific DEXes still rack up an impressive trading volume. The Katana DEX, for example – which only caters to Axie Infinity players – has frequently achieved $100M+ in daily trading volume and averages over $2M/day.

Most of today’s DEXes either operate on a single chain or an independent version of the DApp is available on multiple chains with no cross-chain trading capabilities. Thanks to recent advances in cross-chain technologies like bridges and atomic swaps, though, the first generation of cross-chain DEXes are now operational. These include Atlas DEX, Swappery, SushiXSwap, THORswap and several others.

Most platforms that offer cross-chain swaps use a mix of bridges and decentralized liquidity pools, while others get their liquidity from DEXes on different blockchains. These usually utilize bridges to move tokens between chains.

Cosmos features many cross-chain DEXes too, like Osmosis and Crescent; however, these are limited to the Cosmos ecosystem and cannot connect assets from non-Cosmos SDK blockchains.

While a few atomic swap DEXes, like Atomex, exist currently, none has been adopted by the majority.

The digital currency exchange (DEX) industry is rapidly innovating and can be considered one of the fastest-moving sectors of the decentralized finance (DeFi) space.

In a little more than half a decade, the number of decentralized exchanges has exploded. Some of these newer options are starting to stack up against centralized platforms when it comes to liquidity, features and user-friendliness.

A new generation of DEXes is being created as we speak, and Sudoswap is leading the way. They just launched sudoAMM, a DEX that uses AMM-like bonding curves to change how users buy and sell NFTs. With this innovative approach, Sudoswap is paving the way for a new era of decentralized exchanges.

A tokenized equity DEX called Nasdex was recently launched, which allows users to trade tokenized equities over the blockchain. In addition, the Terra-based DeFi hub Mirror Protocol enables users to trade synthetic equities including AMZN, AMD, and COIN. Furthermore, central bank digital currencies (CBDCs) might get their own DEX treatment in the future.

A regulated CBDC DEX is currently being explored by central banks in more than 100 regions worldwide, and there is a small chance that a permissionless DEX will be launched— since most CBDCs are likely to launch on permissioned blockchains.

However, this will take several years at the earliest.