Lesson 3
Trading value on the XRPL’s decentralized exchange (DEX)
Swap what you have for what you want
Just having tokens isn’t very useful unless you can trade them. Luckily, the XRP Ledger was the first blockchain to feature a built-in decentralized exchange (DEX). This means you can trade XRP or tokens without having to send them to a centralized exchange.
The XRPL DEX is trustless—you don’t have to worry about losing assets to hacks or thefts. The DEX is also non-custodial, meaning that you retain full control of your assets at all times.
So, what can you trade on the XRPL DEX?
You can trade any asset that is held inside your XRP wallet, including, but not limited to:
- XRP
- Issued Tokens
- Stablecoins
Example: you have a learning club and decide to tokenize memberships
This means you will exchange a one hour session for 1 LEARN token. You only want to trade LEARN tokens for USD but you receive an offer to purchase the membership with tokenized gold. The XRPL is able to facilitate this transaction using ‘auto bridging’ or ‘pathfinding’.
Auto bridging uses XRP as an intermediary asset to find the best exchange rate. This is most helpful when an asset does not have enough liquidity to transact at competitive rates.
Pathfinding uses a series of assets to “hop” from one currency or form of value to another, finding the best path with the best route to go from one form of value to the other. For example, if a seller wanted to trade their XRP for tokenized gold, pathfinding may find that the best solution is to first trade XRP for USD, and then trade that USD for tokenized gold.
‘Bids’ and ‘asks’
Just like with a centralized exchange, the XRP DEX uses a ‘bid’ and ‘ask’ system.
- Bid: A buyer can specify a price they want to buy at or below
- Ask: A seller can specify a price they want to sell at or above
Example: Let’s assume the current price of XRP is $0.50. If a seller wants to sell their XRP for $0.60, they would place an ask order at $0.60 on the DEX. If a buyer wanted to buy XRP for $0.40, they would place a bid order at $0.40 on the DEX.
All bids and asks for each asset are tracked in an order book on the XRP ledger. This feature improves market transparency and allows you to quickly see the best prices available for each asset.
