Definition
DEXs enable token trading directly from user wallets without depositing funds with a centralized entity. They use smart contracts (usually AMM-based) to facilitate trades. Benefits include self-custody (you control your keys), no KYC requirements, and access to long-tail tokens. Drawbacks include lower liquidity than centralized exchanges, front-running risk (MEV), and smart contract risk.
lightbulb Example
A user swaps 5 ETH for DAI on Uniswap directly from their MetaMask wallet. No account creation, no deposits, no identity verification. The smart contract executes the trade atomically—either it completes or reverts entirely.
verified_user Key Points
- Peer-to-peer trading via smart contracts
- Self-custody—users control their own assets
- No KYC/identity requirements
- Lower liquidity than centralized exchanges