Traditional financial markets typically rely on centralized exchanges, like the New York Stock Exchange, to connect buyers and sellers and facilitate trades. Similarly, in cryptocurrency markets, centralized exchanges such as Coinbase and Binance serve this role.
However, decentralized exchanges (DEXs) like Uniswap and PancakeSwap allow users to trade digital assets directly, without intermediaries. While this peer-to-peer model offers greater autonomy, it also exposes users to risks such as fraudulent activities, including liquidity “rug pulls,” where large amounts of liquidity may be removed suddenly to the detriment of other market participants.
In the Law360 article, “The Ins and Outs of Decentralized Digital Asset Exchanges,” written by CRA’s Swati Kanoria, she highlights recent cases involving regulatory actions and fraud in the DEX space, underscoring the importance of understanding DEX market structures. Unlike centralized exchanges that use order books, DEXs commonly utilize the automated market maker (AMM) model, which is explored further in the article.
Read more about decentralized digital asset exchanges here.
