Apol Saimon1232's blog : What is a decentralized exchange
A decentralized exchange is a cryptocurrency trading application where exchanges and other transactions are carried out via smart contracts without the use of a centralized trading system. Users mainly access DEXs either through a web browser or through smartphone apps.
The fundamental difference between decentralized and centralized exchanges is that they do not store user funds or control transactions. Funds are transferred directly from the user's wallet, which he connects to the decentralized platform.
There is also no user verification procedure (KYC) on DEX, meaning that transactions can be made completely anonymously, which is often used by scammers.
Decentralized exchanges have become a key element in the field of decentralized finance (DeFi). As of early 2023, according to coinmarketcap, there are about 300 decentralized exchanges operating on several dozen blockchains.
Here are the most popular ones:
OKX — a decentralized crypto exchange with over 340 tokens;
Uniswap — a popular decentralized exchange for DeFi;
PancakeSwap — the best DEX for discovering new cryptocurrencies;
SushiSwap — a fast-growing DEX for crypto farming;
dydx — a leading decentralized crypto exchange for day trading;
Curve Finance — the best DEX for DeFi crypto staking;
Kine Protocol — an advanced DEX for crypto trading and staking;
ApolloX — trade decentralized bitcoin futures.
What is the difference between CEX and DEX
Binance, Coinbase, Huobi, Bitfinex, KuCoin work in a similar way to traditional stock exchanges. They took a ready-made algorithm that worked many years before the advent of crypto and transferred it to digital assets.
Centralized exchanges are governed by specific legal entities that are responsible for the operation of the trading platform, the safety of user funds, and compliance with laws.
This is why decentralized crypto trading platform has access to customer funds, and this is why in 2022, against the backdrop of the bankruptcy of FTX, there was an outflow of capital from CEX. The exchange administration was suspected of using client assets, which caused fear of losing crypto assets among crypto activists and their withdrawal to cold and hot wallets.
If necessary, the management of a centralized exchange can block an individual user, a specific transaction, or an entire direction, such as depositing or withdrawing funds. In addition, each new user who registers on CEX must undergo the identity verification procedure (KYC).
In turn, decentralized exchanges are not an intermediary in transactions; they do not store funds and personal data of their users. Client identification mainly occurs using blockchain addresses and non-custodial wallets that connect to the platform through the application. Trading and other transactions on a DEX are done through smart contracts.
Many decentralized exchanges do not have a management team. Key decisions are made by the community of governance token holders through voting through a DAO. However, DEXs often have a core developer who creates and develops smart contracts or the program protocol. The source code for key components remains open.
