# DEX

At the core of our ecosystem is our decentralized exchange (DEX).

Our DEX allows users to trade almost any token on the BNB Chain and our own BabyBNBTiger blockchain.

Users can also provide liquidity to the DEX, earning passive income from the tokens they hold through trading fees in the form of liquidity provider tokens (BabyBNBTiger-LPs)

<figure><img src="/files/c4WorNKPbHKqAPAPPvjW" alt=""><figcaption></figcaption></figure>

**How Decentralized Exchanges Work**\
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Unlike centralized exchanges, which use third-party intermediaries like market makers to facilitate trading between tokens, decentralized exchanges use smart contracts to coordinate trades between users. This allows for permissionless and anonymous trading free of the constraints of centralized exchanges.\
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In a decentralized exchange like  DEX, all liquidity is added by users and partner projects. To incentivize deeper liquidity, a decentralized exchange can offer reward tokens to liquidity providers, as well as a share of trading fees earned from trades from a token pair. \
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A token cannot be traded for another token on the  DEX unless there is ample liquidity depth in the exchange for that token pair. For example, let's say a project launched the "PROJ" token on BNB Chain, but did not add any BNB-PROJ (or any other \[TOKEN]-PROJ combination) liquidity to the  DEX. \
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In this example, a user would not be able to swap into the PROJ token with any other assets, because there is no liquidity on the DEX to swap with. It is impossible to push BNB into a liquidity pool and pull out PROJ, because there are no PROJ tokens on the  DEX. \
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This is why a DEX must maintain sufficient liquidity for all token pairs that it offers for trading. Traders can also run into issues with price impact and slippage if there is insufficient liquidity for a particular token pair.  \
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BabyBNBTiger typically recommends having at least $150,000 of liquidity for a trading pair to operate effectively on our DEX. Using the same example, the new project would need to add $75,000 of BNB and $75,000 of PROJ to the  DEX in order to be listed.\ <br>


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