DEX (decentralized exchange)

A DEX is a decentralized exchange: a smart contract on a blockchain that lets you swap tokens straight from your own wallet, with no account and no middleman holding your funds.

How it works

On a regular exchange you deposit money and the exchange matches orders. On a DEX you connect your wallet, pick a pair and sign a transaction. A smart contract performs the swap and the tokens land in your address right away. Most DEXs use liquidity pools and an automated market maker (AMM) rather than an order book.

Pros: you keep your keys, the contract itself has no KYC, and new tokens are tradable the moment they launch. Cons: you pay network fees (gas), thin pairs have slippage, and anyone can create a fake token with the same name.

Mistakes on a DEX are final. Nobody refunds you if you buy a fake token or sign a malicious approval. Always check the token's contract address and use only the official site address.

Example with numbers

You swap 1 ETH for USDC at $3,000. The 0.3% pool fee is $9, gas is, say, $2, and 0.1% slippage costs another $3. About 2,986 USDC arrive in your wallet.

Common mistake

The most common mistake is searching a token by name and buying the first result. Scammers deploy copies with the same ticker. Take the contract address from the project's official site or a trusted block explorer and paste it into the DEX search.

Questions and answers

What is a DEX in simple terms?

It is an exchange that is a program on a blockchain. You swap tokens from your own wallet and nobody holds your money.

Do I need KYC to use a DEX?

The smart contract does not require it, you only need a wallet. Some website front ends may still block certain countries.

What is the difference between a DEX and a regular exchange?

On a centralized exchange a company holds your funds and matches orders. On a DEX you keep the keys and code does the swap, but you are fully responsible for mistakes.

DEX (decentralized exchange)

How it works

Questions and answers

Related terms

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