DEX (Decentralized Exchange):
DEX stands for Decentralized Exchange. These exchanges operate on decentralized networks and do not rely on a central authority. DEXs aim to provide a more peer-to-peer trading experience, where users can trade cryptocurrencies directly with one another without the need for an intermediary. The transactions on DEXs are typically facilitated by smart contracts and executed on the blockchain itself.
Key Features of DEXs:
- Decentralization: DEXs operate on decentralized networks, such as Ethereum, and do not rely on a central authority to control user funds or facilitate trades.
- User Custody: Users retain custody of their funds, as they are stored in their personal wallets, rather than being held by the exchange.
- Security: DEXs generally provide enhanced security since they are not susceptible to centralized hacking or fraud. Users have control over their private keys and execute transactions directly on the blockchain.
- Transparency: DEX transactions are transparent and recorded on the blockchain, allowing anyone to verify the transactions and ensuring a higher level of trust.
- Limited Selection: DEXs may have limited trading options and liquidity compared to CEXs, as the trading volume and number of users are typically lower.