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How Do Decentralized Exchanges (DEXs) Handle the Clearing Function without a CCP?

DEXs use smart contracts and AMMs/order books for automated, transparent clearing and settlement, relying on over-collateralization and on-chain liquidation for risk management.
Greeks.Live08.11.25

How Do Decentralized Exchanges (DEXs) Handle the Clearing Function without a CCP?

DEXs handle the clearing function through smart contracts and automated market makers (AMMs) or order book protocols. The smart contract acts as a transparent, automated clearing mechanism, holding collateral and executing settlement based on pre-programmed rules.

Risk is managed by over-collateralization and on-chain liquidation mechanisms, replacing the centralized counterparty guarantee with cryptographic and economic incentives.

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