DEX (Decentralized Exchanges)

What is a DEX? A DEX stands for Decentralized Exchange. To understand it, let's first look at its counterpart, the centralized exchange.

Centralized Exchange (CEX):

• Operated by a centralized organization or company.

• Users deposit their funds into the exchange's wallets.

• The exchange is responsible for matching buy and sell orders, holding users' funds, and ensuring transactions are executed.

• Examples of common CEXs include Coinbase, Binance, and Kraken.

You can see more Centralized exchanges on CoinGecko.

Decentralized Exchange (DEX):

• Operates without a central authority or intermediary.

• Trades occur directly between users, peer-to-peer.

• Uses smart contracts (self-executing contracts with the terms of the agreement directly written into code) to facilitate, verify, and enforce the negotiation or performance of a trade.

• Users retain control of their funds and only send them when a trade is executed.

• Examples include Uniswap, GMX, and dYdX.

You can see more Decentralized exchanges on CoinGecko.

Key Advantages of DeFi Exchanges:

1. Security: Since users don't deposit their funds into a centralized wallet, there's a reduced risk of large-scale hacks that have plagued some centralized exchanges.

2. Censorship Resistance: Without a central authority, it's harder for governments or other entities to shut down or regulate the exchange.

3. Privacy: Often, DEXs don't require users to undergo identity verification, allowing for more anonymous trading.