DEX Pricing Mechanism

Definition ∞ A DEX pricing mechanism refers to the method by which prices for digital assets are determined on a decentralized exchange. Many DEXs employ automated market maker models, utilizing liquidity pools and mathematical formulas to facilitate trades. These mechanisms ensure continuous liquidity and price discovery without requiring traditional order matching. Constant product market makers are a prevalent example.
Context ∞ The evolution of DEX pricing mechanisms is a constant subject in decentralized finance news, particularly concerning efficiency and slippage. Debates often address the advantages of different models in providing fair trading conditions. Innovations in these mechanisms aim to improve capital efficiency and reduce transaction costs in the rapidly expanding DeFi sector.