What is a DEX? Decentralized Exchange

What is DEX?

Decentralized Exchange - trade crypto directly from your wallet without a middleman, using smart contracts instead of company servers.

A DEX (Decentralized Exchange) enables peer-to-peer crypto trading without intermediaries. Instead of depositing funds with a company, you trade directly from your wallet through smart contracts.How DEXs work:AMM-based: Trade against liquidity pools (Uniswap, Curve)Order book: Match buyers and sellers on-chain (dYdX, Serum)Aggregators: Route through multiple DEXs for best price (1inch, Paraswap)DEX vs CEX:Custody: DEX = your wallet; CEX = exchange holds fundsKYC: DEX = usually none; CEX = requiredListings: DEX = permissionless; CEX = curatedSpeed: DEX = blockchain speed; CEX = instantPopular DEXs: Uniswap (Ethereum), PancakeSwap (BNB), Raydium (Solana), TraderJoe (Avalanche).How DEXs compare to centralized exchanges: Centralized exchanges like Coinbase and Binance offer deeper liquidity, faster execution, and fiat on-ramps, but require KYC verification and hold custody of your funds. DEXs trade those conveniences for self-custody and permissionless access, meaning anyone with a wallet can trade any listed token without approval. Uniswap dominates Ethereum DEX volume, PancakeSwap leads on BNB Chain, and Raydium is the top choice on Solana, each optimized for its chain's speed and fee structure.Trade-offs to consider: DEXs generally have higher slippage on large orders due to lower liquidity compared to CEXs. Gas fees on Ethereum can make small trades uneconomical, though Layer 2 DEXs and Solana-based platforms offer much cheaper alternatives. The lack of KYC provides privacy but also means less regulatory protection if something goes wrong.

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Examples

1.Uniswap processes billions in monthly volume, all through smart contracts with no company intermediary.
2.After FTX collapsed, DEX volume surged as traders moved to non-custodial solutions.

Frequently Asked Questions

What is a DEX?

A DEX (Decentralized Exchange) lets you trade crypto directly from your wallet using smart contracts. No middleman holds your funds - you maintain custody throughout.

Are DEXs safe?

DEXs eliminate custodial risk (exchange can't steal or lose your funds), but introduce smart contract risk. Use audited, established DEXs and verify contract addresses.

Why use a DEX over Coinbase?

Self-custody (you control your keys), no KYC for most trades, access to tokens before CEX listings, and trading continues even if the website goes down.