How a DEX works
A DEX replaces the central operator of a traditional exchange with smart contracts deployed on a blockchain. Participants connect their own wallets and trade directly against those contracts, which hold and settle funds programmatically. Because no central intermediary takes custody, assets remain under the participant's control until a trade executes, and every transaction is recorded on the blockchain.
Liquidity pools and automated pricing
Rather than matching individual buy and sell orders in a central book, many decentralized exchanges price trades using liquidity pools. Participants known as liquidity providers deposit pairs of assets into a pool, and a formula sets the price from the relative quantities held. A trade swaps one asset for another against the pool, and the price moves as the balance shifts. This model, commonly called an automated market maker, is what allows a DEX to operate without a traditional order book.
DEX versus a centralized exchange
The central difference is custody and structure. A centralized exchange holds participants' funds and matches orders in an internal order book, whereas a DEX is non-custodial and settles trades through on-chain contracts. A centralized venue can offer deep order books and fast matching, while a DEX offers self-custody and full on-chain transparency. Many assets, particularly newer tokens, trade primarily or exclusively on decentralized exchanges.
Reading DEX data
Because a DEX operates on-chain, its activity is public. Each swap, each change in liquidity, and the state of each pool can be read directly from the blockchain. DEX market data therefore covers swap-level trades, pool reserves, and the prices implied by those pools, across multiple blockchains. Since the same token can trade in several pools and on several chains, a representative price is usually built by aggregating across them.
DEX data on SiftingIO
SiftingIO publishes DEX data, including swap-level activity, liquidity pools, and DEX trade history, across Ethereum, major Layer 2s, and Solana, under the same schema and credential as every other market. Prices from decentralized venues feed into the aggregated fair price alongside other sources, and on-chain fundamentals such as TVL sit beside the price data. Coverage expands as each dataset meets the platform's quality standard.