Decentralized Exchange (DEX)
A peer-to-peer crypto trading platform governed by smart contracts with no central intermediary.
What is DEX?
A decentralized exchange (DEX) is a cryptocurrency marketplace that operates through self-executing smart contracts on a blockchain, enabling users to trade directly from their own wallets without depositing funds with a central operator. Unlike centralized exchanges, DEXs do not hold customer assets, do not require identity verification, and cannot freeze withdrawals. The most common DEX model uses automated market makers (AMMs), where liquidity providers deposit token pairs into pools and traders receive prices determined algorithmically by the pool ratio. Uniswap on Ethereum pioneered this model. DEXs offer censorship resistance and access to new tokens immediately upon launch, but typically have lower liquidity than top centralized exchanges, higher gas fees, and greater complexity for new users.
Example
Uniswap, the largest DEX by volume, processes billions of dollars in trades weekly without holding any user funds. A trader connects their MetaMask wallet, selects a token pair, and the smart contract executes the swap automatically, taking a small liquidity fee distributed to pool providers.
Source: Uniswap Protocol Documentation