DEX

Decentralized exchange (DEX) are a peer-to-peer marketplaces where users trade cryptocurrencies and tokens without the need for a third party.

Technical details

DEXs are built on blockchain, which allows them to operate without a central authority, which in turn makes them more secure and transparent than traditional centralized exchanges.

The main advantages over centralized exchanges are:

• Security: DEXs are more secure because they do not store user funds. Instead, users control their own funds by using a non-custodial wallet. This means that there is no single point of failure that could be exploited by hackers.
• Transparency: DEXs are more transparent because all transactions are recorded on the blockchain, which allows users to verify the authenticity of transactions and to track the movement of the funds.
• Efficiency: DEXs are more efficient because they do not require the use of a third party, which can lead to lower fees and faster transaction times.
• Decentralization: DEXs are not owned or operated by a single entity, which means that they are not subject to the same risks as CEXs.
• Privacy: DEXs do not require users to undergo KYC (Know Your Customer) verification. This makes them a more accessible option for users who are concerned about privacy.
• Low fees: DEXs typically charge lower fees than CEXs.

However, DEXs also have some drawbacks, such as:

• Technical complexity: DEXs can be more difficult to use than CEXs. Because they are not as user-friendly and require users to have a basic understanding of cryptocurrency and blockchain technology.
• Liquidity: DEXs typically have lower liquidity than CEXs. This means that it can be more difficult to buy and sell cryptocurrencies on DEXs.

Popular DEXs

Some of the most popular DEXs are:

• Uniswap: Uniswap is a popular DEX that uses an automated market maker (AMM) to facilitate trades. AMMs are algorithms that set the prices of tokens based on supply and demand.
• SushiSwap: SushiSwap is a fork of Uniswap that offers some additional features, such as staking and yield farming.
• PancakeSwap: PancakeSwap is a DEX that runs on the Binance Smart Chain. It offers a number of features similar to Uniswap and SushiSwap.

See Also

CEX - Centralized exchange

External links

https://chain.link/education-hub/what-is-decentralized-exchange-dex