DEX (decentralised exchange)
A DEX is a trading venue for tokens that runs as a smart contract: buyers and sellers trade directly from their wallets, with no operator in between.
Explained simply
On a classic exchange you deposit money with the operator, who runs an order book. On a DEX you keep your tokens in your own wallet and swap them directly with a smart contract.
Most DEXs work without an order book. Instead there are liquidity pools: pots with two tokens from which the price is computed by formula. Whoever swaps pays a small fee to the pool providers.
Advantage: no sign-up, no custody with the operator. Disadvantage: no supervision, no help with mistakes, and the user is responsible for security.
From the familiar world
A currency exchange machine at the airport with no cashier but two cash boxes: euros and dollars. You insert euros, it dispenses dollars, and the emptier one box gets, the more expensive that currency becomes. That is essentially a liquidity pool.
An example
The largest decentralised exchange settles trading volume in the billions on some days, without anyone ever having opened an account.
Why it matters
DEXs prove that a trading venue can work without an operator. For clients the key point is: the convenience and protection of a regulated exchange are missing. Those who do not want that stick with regulated providers and products.
To pass on
„A DEX is an exchange without an operator: you swap straight from your wallet with a program.“
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