The first day of November was both an exhilarating and frustrating day… For me at least…

My phone rang out pleasantly in the morning, notifying me of an ETH deposit into my Trust wallet. I smiled as I became a few thousands richer at that moment. Didn’t know I was soon going to be frowning that same day though…

Later, while I was doing some research on a particular token, I noticed something interesting. The token's price on two different DEXs had a significant price difference, 15% higher than the other. Someone or some people had probably just bought a sizeable amount of the token on the DEX where it was 15% more expensive, leaving an opportunity for me to exploit.

I had to move quickly

I immediately got to exploiting, bought a good chunk of the tokens with the cheaper price, and immediately went to sell these tokens on the other platform where the price was much higher…

And just like that, I made a 15X profit and grew my portfolio in a sudden and unexpected way.

I had to do it all very quickly though since someone else was going to notice it, either in a matter of minutes or even seconds, and immediately take that profit for themselves.

I wondered why nobody had set up a bot to take advantage of the opportunity but it was a new token so I wasn’t too surprised…

After my exhilaration, the frustrating part of that day came when I lost all the money I got that day to a malicious attack that hacked my wallet and drained it dry.

I tried so many ways to salvage the situation but the money was all gone. I had to leave it at that and move on.

Now there are two lessons to be learned from my story, you can probably guess what they are actually…

But what you’ll never guess is the secret hidden in this short story of mine that you just read, try as you might I’m pretty sure you won’t be able to figure out what it is, don’t worry though I’ll expose this secret myself at the end of this article.

Now the two lessons to be learned from my story are these:

1. Whatever you do, take your wallet security very seriously, otherwise, you’ll end up being a victim of malicious attacks and lose all your hard-earned money in the blink of an eye to those annoying attacks, and you won’t be able to do anything about it.

2. DEXs are cool places to make money if you know what it is and how to use it.

The question to ask now though is do you know what a DEX is?

Do you?

If you do. Good, you can skip past these next few paragraphs and jump right down to the end of this article to figure out the secret I hid in the story I told.

If you don’t, don’t stress, these next few paragraphs are just for you…

Why?

Well, I’ll be explaining what a DEX is, what the benefits and downsides of using a DEX are,  as well as the two ways in which a DEX can work,

All of that, I’ll explain as quickly and simply as possible so you don’t end up getting tired of reading and give up on reading further…

First, let’s start with what a DEX really is.

Basically, A DEX is a platform that allows you to trade/swap your cryptocurrencies(i.e. Your coins or tokens) without the intervention or facilitation of a central party, there’s no middleman involved in the transactions.

I say there’s no middleman in charge of monitoring or managing your swaps or trades, but there are technically still some things in the middle facilitating your transactions, they’re just not actual human beings…

Instead, they’re what’s called smart contracts,

These smart contracts are simply a compilation of codes that are programmed to facilitate the transaction of tokens in a fair, automatic, and decentralized way.

The use of these smart contracts has led to a good number of benefits in using DEXs which include:

1. Anonymity: You don’t need to submit any means of identification to use a DEX, hence your transactions on the DEX remain anonymous.

2. Trustlessness: There’s no need to trust in the fact that the central authority holding your money will tamper with it since there’s no central human authority in the first place.

3. Faster Transaction Speed: DEXs are much faster than their counterparts; CEXs, which if you don’t know what they are, are basically just Centralized DEXs.

4. Cheaper Transaction Rates: Compared to CEXs once again, making transactions on DEXs is cheaper due to cheaper fees…

While these benefits make DEXs a seemingly more suitable choice to use to transact, they aren’t without downsides as well. These downsides include:

1. Zero Support: There’s no customer care to help you out if there’s an issue with your transactions since there’s no middleman, just a smart contract.

2. Exposed Code: For DEXs to truly prove their decentralization, their codes usually have to be open source, meaning that anybody can access these codes. A hacker can thus easily analyze the code and find loopholes to exploit, hence causing serious damage.

3. Low Liquidity: Some DEXs usually have low liquidity pools of tokens in them, this usually leads to relatively sizeable transactions in them causing the prices of the tokens to fluctuate in a volatile manner.

4. Mandatory Connection: When using a DEX, it’s mandatory that your wallet remains connected to the DEX at all times. Any disconnection can cause complications in the transaction…

All of these downsides are easily circumvented though if enough caution and preparations are taken, so I personally don’t think they’re serious problems, just make sure to do your research on any DEX you’re going to be using.

To aid your research let me now explain the two methods with which a DEX can operate, which are:

1. Order-book method: This is a method that involves the use of an order book, which is basically a list of buy and sell orders, to facilitate the system of transactions.

2. Automated Market Maker (AMM) method: This is another method that involves the use of liquidity pools, which are basically pools of liquid cryptocurrencies, and an automated market making algorithm that adjusts the prices of the cryptocurrencies as they enter and leave the liquidity pool.

The main difference between the ‘Order Book method’ and the ‘Automated Market Making method’ is the fact that the Order Book facilitates transactions between two individuals while the Automated Market Making system facilitates transactions between an individual and a liquidity pool that has been filled with a pool of cryptocurrencies.

If you want to know more about Order books and Automated Market Makers, then you should check out these articles on Order books and Automated Market Makers…

Now you might have jumped from the beginning to all the way down here, or you might have patiently read every word from the beginning until here.

Either way, I know you’re eager to find out the little secret I hid in the story that I told above, so as promised I’ll reveal it here at the end.

Here’s the secret…

I HAVE NEVER USED A DEX BEFORE IN MY LIFE

That’s the secret and the absolute truth, I’ve never used a DEX before because there hasn’t been a need for me to, I haven’t had to trade yet or buy some obscure token in a presale or whatever.

If you’re wondering why I know so much about DEXs, well that’s because I did my research and tried my best to understand it to the best level my comprehension could allow me to...

Knowing all of this now, you’ve probably realized that the story I told at the beginning is one that never really happened, I just spun it up for the sake of this article.

If you really believed it though until my reveal, then that means I did my job well. If it didn’t, then let me know down in the comments.

Either way, I hope you enjoyed reading this article and found value in it one way or the other. I’ll be writing off here until the next time when we meet again.

Your Writer Onchain,

Kyng.