Decentralized exchanges (DEX): full control over crypto assets

Decentralized Exchange (DEX) is a blockchain platform that allows users to make direct cryptocurrency exchanges from their own wallets without the involvement of a central authority or middleman.

Unlike centralized exchanges (CEX), decentralized exchanges operate on the principle of non-custodial storage. This means that the user always retains full control over their crypto assets and private keys.

The Principle of DEX

Decentralized exchanges use smart contracts to automatically execute transactions directly on the blockchain. When a user exchanges tokens through a DEX, the transaction is processed through a smart contract that either matches the orders of buyers and sellers or uses an automated (AMM) market maker with liquidity pools.

The foundation of most modern DEX is indeed the AMM technology, which allows for instant liquidity through token pools, where the price is determined by a mathematical formula rather than a traditional order book.

DEX vs. CEX: key differences

| Characteristic | DEX | CEX | |----------------|-----|-----| | Fund storage | User controls the keys | Exchange stores users' assets | | KYC/AML | Not required in most cases | Mandatory for legal operation | | Liquidity | Limited by liquidity pools | Usually higher due to centralization | | Execution Speed | Depends on blockchain load | High (inside the platform) | | Censorship Resistance | High | Limited (subject to regulators) |

Benefits of Using a DEX

• No KYC and registration Just connect your crypto wallet and you can start trading without providing personal information.

• Full control over assets
  You store your private keys and funds yourself, which eliminates the risk of hacking a centralized storage.

• Access to new tokens
  Many new or low-liquidity tokens first appear on DEX before being listed on centralized exchanges.

• Censorship Resistance
  The decentralized architecture provides a high level of protection against transaction blocking and censorship.

• Transparency of operations
  All transactions are recorded on the blockchain and can be verified by any network participant.

Popular DEX Platforms

• Ethereum: Popular DEXs based on the first blockchain with smart contracts
• BNB Chain: PancakeSwap — the leader in trading volume among DEX on BNB Chain
• Solana: Jupiter, Raydium – High-speed DEXs with low fees
• **Polygon: QuickSwap is a layer-two solution for Ethereum with improved scalability
• Arbitrum: Camelot — DEX on Layer 2 solution with optimized gas fees
• Optimism: Velodrome is a platform with innovative liquidity incentives

What to look for when using a DEX

• **URL Security: Always check the official address of the DEX platform to avoid phishing sites.

• Slippage: On a DEX with limited liquidity, large trades can cause significant price changes.

• Clone Tokens: Be cautious when selecting tokens, verify the smart contract address through a blockchain explorer.

• Hardware wallets: For storing large amounts, it is recommended to use hardware wallets with an additional layer of protection.

• Gas Fees: Especially in networks with high load (, for example, Ethereum), fees can significantly impact the profitability of transactions.

DEXs are an important tool in the modern crypto ecosystem, providing users with freedom, privacy, and full control over their assets when trading digital currencies.