Decentralized Exchange
trading · exchange · blockchain
A decentralized exchange (DEX) lets users trade digital assets from their wallets through smart contracts or peer-to-peer settlement.
- Also known as
- DEX
A decentralized exchange (DEX) lets users trade without depositing assets into a custodial exchange account. Settlement happens through smart contracts, atomic swaps, or other peer-to-peer mechanisms, while users authorize trades from their own wallets.
DEXs commonly use automated market makers (AMMs), on-chain order books, off-chain order relay with on-chain settlement, or cross-chain atomic swaps. Each model trades off liquidity, latency, transparency, and transaction cost.
DEXs can reduce custodial risk, allow permissionless listings, and make trades transparent. They also enable composability, where other DeFi applications route swaps through DEX liquidity.
DEX risks include smart contract bugs, thin liquidity, slippage, MEV, front-running, fake tokens, bridge risk, and irreversible user mistakes. Non-custodial trading removes one intermediary but does not remove market or technical risk.
Related terms
AMM (Automated Market Maker)
→A decentralized exchange mechanism that prices trades against liquidity pools using smart-contract formulas.
trading · dex
Liquidity
→How easily an asset can be bought or sold in size without causing a large price move.
finance · trading
Bridge
→Infrastructure that enables moving assets or messages across blockchains.
technology · defi