A Decentralized Exchange (DEX) is a platform that enables users to trade cryptocurrencies directly with one another without the need for an intermediary, using smart contracts to facilitate transactions. Assets are never held by an intermediary; instead, trades are executed directly between users' wallets.
DEXs, such as Uniswap, SushiSwap, and PancakeSwap emphasize the ethos of decentralization inherent to blockchain technology, offering increased privacy, security, and autonomy over one’s assets. They are integral to the DeFi (Decentralized Finance) ecosystem, supporting a variety of tokens, including those not listed on centralized exchanges. Challenges for DEXs include lower liquidity compared to their centralized counterparts and a steeper learning curve for users unfamiliar with blockchain technology.
