DEX (Decentralized Exchange)
In short: A DEX, or decentralized exchange, is an exchange without intermediaries: users trade crypto assets directly from their own wallets through smart…
A DEX, or decentralized exchange, is an exchange without intermediaries: users trade crypto assets directly from their own wallets through smart contracts, and no company holds their funds during the trade.
Why it matters
On a centralized exchange such as EX5, the platform keeps users' funds in custody and matches buy and sell orders in its own order book. A DEX removes that middle layer, so users keep control of their keys and can usually trade without opening an account. Many DEXs use automated market makers, where prices come from pools of tokens supplied by liquidity providers instead of an order book. In return, users pay a network fee for each swap, face slippage in thin pools, and must make sure they are trading the genuine token, since anyone can create one with a familiar name.
Example
A user wants to swap ETH for a token that is only traded on-chain. They connect a self-custody wallet to a DEX, enter the amount, set a maximum slippage and confirm. In a single transaction, the smart contract takes the ETH from the wallet and sends the tokens back from the liquidity pool, and the wallet pays a gas fee for the swap.