π Definition:
A Decentralized Exchange (DEX) is a platform where you can trade cryptocurrencies directly with other users without a middleman.
Transactions happen directly on the blockchain.
π Key Features:
- No Middleman: Trades happen without a central authority controlling them.
- Privacy: You keep control of your crypto and donβt need to share your personal information.
- Security: There is a lower risk of hacks since funds are not kept on the exchange.
- Variety of Tokens: DEX often supports a lot more cryptocurrencies than CEX (Centralized Exchanges)
βοΈ How It Works:
- Connect Wallet: You connect your crypto wallet to the DEX.
- Place Orders: You create an order to buy or sell cryptocurrencies.
- Smart Contracts: Trades are executed through smart contracts.
- Direct Trading: The transfer is made "on-chain", between the users, without someone in the middle to approve the transaction.
π‘ Applications:
- Trading: With a DEX you can buy and sell more cryptocurrencies than on most exchanges.
- Privacy: A DEX helps you to keep your transaction private as there is no KYC required.
- Control: You keep control of your private key and cryptos all the time.
- Liquidity Pools: You can provide liquidity to earn rewards.
π Example:
Imagine a community library where people can exchange books directly with each other without a librarian.
You just leave your book and take another one you like.
A DEX is similar.
It lets users trade cryptocurrencies directly with each other without a central authority.