Course Content
What Is a Decentralized Exchange (DEX)?
You probably know the drill with cryptocurrency exchanges. Sign up with your email, come up with a strong password, verify your account, and start trading cryptocurrency. Decentralized exchanges are like that, minus the hassle of sign-ups. In most cases, there’s no depositing or withdrawing crypto. The trade happens directly between two users’ wallets, with limited (if any!) input from a third-party. Decentralized exchanges can be a bit trickier to get the hang of, and they might not always have the assets you want. But, as the tech and interest in it grow, these may very well become integral components in the cryptocurrency sphere.
What Is a Decentralized Exchange (DEX)?
About Lesson
With your typical centralized exchange, you deposit your money – either fiat (via bank transfer or credit/debit card) or cryptocurrency. When you deposit crypto, you give up control of it. Not from a usability standpoint, as you can still trade it or withdraw it, but from a technical standpoint: you cannot spend it on the blockchain.
You don’t own the private keys to the funds, which means that when you withdraw, you ask the exchange to sign a transaction on your behalf. When you’re trading, transactions don’t occur on-chain – instead, the exchange allocates balances to users in its own database.

The general workflow is incredibly streamlined because the slow speeds of blockchains don’t impede trading, and everything occurs in a single entity’s system. Cryptocurrencies are easier to buy and sell, and you have more tools available to you.

This does come at the cost of independence: you need to trust the exchange with your money. As a result, you expose yourself to some counterparty risk. What if the team runs off with your hard-earned BTC? What if a hacker cripples the system and drains the funds?

For many users, this is an acceptable level of risk. They simply stick to reputable exchanges with strong track records and precautions that mitigate data breaches.