What Is a Decentralized Exchange (DEX)?
Decentralized exchanges (DEX) are a type of cryptocurrency marketplace that connect crypto sellers and buyers directly, allows for peer-to-peer(P2P) cryptocurrency transactions online and without the need for an intermediary agency. It means you can exchange assets on DEX without having to trust your funds with another entity. These kinds of exchanges have become quite popular in recent years since they align with the fundamental philosophy of blockchain technology-- Decentralization. How Does a Decentralized Exchange (DEX) Work? To realize the decentralization, third-party (e.g. banks, stockbrokers, online payment gateways, government institutions, etc.) which take custody of user funds and oversees the security and transfer of assets are replaced by a blockchain or distributed ledger. Smart contracts were used by DEXs to execute market transactions by allocating transactions' operations to autonomous code, although there are multiple variations of order fulfillment with differi...