What kind of exchange is Open Sesame? Detailed explanation of the principle, advantages and disadvantages of Open Sesame

Open Sesame is a decentralized cryptocurrency exchange based on the Ethereum blockchain. It uses an automatic market-making mechanism to provide the advantages of no intermediary, accessibility, liquidity, automation, etc., but it also suffers from high transaction fees, Disadvantages such as limited asset selection and slippage.

What kind of exchange is Open Sesame?

Open Sesame is a decentralized cryptocurrency exchange based on Ethereum blockchain technology.

Open Sesame Principle

Open Sesame uses a mechanism called automatic market making (AMM), which is a liquidity pool controlled by smart contracts. Traders can buy and sell cryptocurrencies by trading with pools without relying on other traders.

Smart contracts act as automated market makers (AMMs) for liquidity pools, adjusting prices based on a mathematical formula (constant product formula). This formula ensures that the product of the two assets in the pool always remains constant, thus keeping the price stable.

Advantages of Open Sesame

• No intermediary required: Decentralized exchanges eliminate the need to use centralized exchanges as intermediaries, thus eliminating trust issues and transaction fees.
• Accessibility: Because Open Sesame is based on the Ethereum blockchain, anyone with an Ethereum wallet can access it.
• Liquidity: The AMM mechanism provides liquidity through the use of liquidity pools to facilitate trading even when trading volumes are low.
• Automation: Smart contracts are responsible for executing transactions, eliminating the need for manual processing, thereby increasing efficiency.

Disadvantages of Open Sesame

• High Transaction Fees: Transaction fees on Open Sesame may be higher compared to centralized exchanges.
• Limited Asset Selection: The number of cryptocurrencies available on Open Sesame is limited, and new assets are slow to come to market.
• Slippage: When liquidity is low, traders may face large slippage, which is the difference between the actual price and the expected price when the trade is executed.

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