DeFi trading refers to the exchange of digital assets on decentralized finance platforms. This activity occurs on blockchain-based protocols, often utilizing automated market makers rather than traditional order books, and allows participants to swap cryptocurrencies directly from their self-custodied wallets. It bypasses centralized intermediaries, offering greater accessibility and transparency. Participants often provide liquidity to these protocols in exchange for trading fees.
Context
DeFi trading is currently a key area of innovation and regulatory scrutiny, particularly concerning consumer protection, market manipulation, and anti-money laundering compliance. A significant debate involves the scalability of underlying blockchains to support high-frequency trading and the risks associated with impermanent loss for liquidity providers. Future progress will likely involve cross-chain trading solutions and enhanced security audits for decentralized exchanges.
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