How do decentralized crypto exchanges make money?

Another answer here refers to the smart contract method - which would give the exchange a % of the coins. This only works for certain kinds of coins though, namely ERC20 tokens or anything tied to Ethereum smart contracts.

It doesn’t explain how they make money when you trade Bitcoin for Litecoin - no smart contract could allocate a % of these coins to the exchange’s wallet. The only way for them to take such a % would be if the coins were sent THROUGH the exchange's wallet, that takes a small %. This would not be decentralized.

In a truly decentralized exchange all you’d do is match a buyer to a seller. I want to buy litecoins, someone wants to trade them with me for bitcoins. The platform puts us in touch.

This doesn’t allow for-profit - which is bad because then there is no incentive for such exchanges to exist. These are the current types of exchange platforms:

• Some run as not-for-profits, or on a donation model.
• Others use their own tokens as a payment method (you buy their tokens, and fees are charged in their tokens regardless of what coins you’re trading).
• Some ARE based on smart contracts (for trading ERC20 tokens / ETH only).
• Some are semi-decentralized where the coins pass through their wallets to take a % fee and arrange the transaction (kind of like an escrow), but they still match buyers/sellers 1-to-1.
• Others simply aren’t decentralized (E.g. Coinbase), which is kinda the same as the above but they don’t match buyers 1-to-1, i.e. they store huge quantities of the coin and buy and sell at certain rates. They also hold coin for their users.

Each set-up is entirely different and I’ve definitely missed a few!

It’s a problem that is being solved at the moment and I’m sure there are better solutions than what currently exists. The existence of decentralized exchanges that are democratic and fair is paramount to the growth of cryptos - we all know the big exchanges that have had hacking problems or huge theft by the exchange owners. This is caused by having decentralized exchanges who have access to a high value of the coin. Decentralized exchange development is one of the searched business models nowadays too and the decentralized exchange software is developed by the high-end specifications to avoid the risks.

If an exchange was simply matching buyers with sellers, these issues are negated.