What Is a Decentralized Exchange and How Does It Help the Crypto Community?
In cryptocurrency, a DEX is simply known as Decentralized peer-to-peer Exchange. It is an exchange run by code. It usually exists as a decentralized application (DApp). It is a place where people can trade cryptocurrencies directly without a middleman.
On a DEX, trading is done using smart contracts, and every transaction is written on a blockchain. A DEX replaces the need for a centralized exchange to act as a middleman, although DEX projects do need developers supporting the automation.
One example of a DEX is Coinswap. Coinswap devs wrote the code, provide the website, and even have a token. However, the software and the BSC network take care of the rest.
In addition, there are also several notable DEXs doing millions of dollars in volume a day.
Note: Although a DEX has no middleman when it comes to trades (all trades are between two peers), developers generally manage the platform. Thus, aspects of a DEX won’t be fully decentralized. In general, a DApp needs a front end, and that front end is often not coded onto a blockchain and thus must be managed to some degree. Likewise, a team of developers may end up working on the code, and who works on the code may be controlled by a team (even if it’s a decentralized team). Also, developers may be able to do things like add and remove coins from trading. In sum, how much outside control there can differ by exchange, but since the code had to be created by someone and since aspects of it have to be managed, a DEX is not fully decentralized, just specifically the trading is.
Tip: Since transactions on a DEX are recorded on the blockchain, 1. It can be slow to process if transactions are congested, and 2. they have no way to reverse transactions. So if you make a bad trade, even by accident, there is no way to undo it in general with a DEX. Likewise, you’ll have to pay fees for everything you do on a DEX. So better make sure that before you do any actions or transactions, make sure you DYOR.
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