Swap (DEX)

A swap on a decentralized exchange (DEX) is the direct exchange of one digital asset for another within a liquidity pool, facilitated by automated market maker (AMM) smart contracts without intermediaries.

What is Swap (DEX)?

A swap on a DEX, such as Uniswap, Sushiswap, or Curve, allows users to trade one token for another by interacting with liquidity pools, which are smart contracts holding pairs of tokens (e.g., ETH/USDC). Governed by AMM formulas like the constant product formula (x * y = k), swaps adjust token ratios to determine prices dynamically based on supply and demand. Unlike centralized exchanges, DEX swaps occur on-chain, ensuring transparency and custody-free trading. As of September 2025, DEXs process $1.5 trillion in annual trading volume, with Uniswap V3 alone handling $4 billion in total value locked (TVL), per DeFiLlama data.

For example, swapping 1 ETH ($3,000) for USDC on Uniswap V3 in a pool with $10 million TVL incurs a 0.3% trading fee ($9) and a gas fee of ~$5 on Ethereum (100,000 gas at 20 gwei) or ~$0.50 on Arbitrum. The trade might yield ~2,985 USDC after fees, with 0.1% slippage in high-liquidity pools, per Uniswap analytics. In contrast, a swap in a low-liquidity pool ($100,000 TVL) could face 2% slippage, reducing output to ~2,940 USDC. Risks include price volatility between transaction submission and confirmation (e.g., 12 seconds on Ethereum), as seen in a 2023 flash crash causing 5% slippage on a $50,000 trade. Users can mitigate costs using layer-2 DEXs or aggregators like 1inch, which optimize routes across pools, critical for efficient trading in DeFi’s $75 billion ecosystem.