What are Decentralised exchanges? (DEXs)
Decentralised exchanges, or DEXs, are a new type of cryptocurrency exchange that operates on a decentralised platform. Unlike centralised exchanges, which are controlled by a single entity, DEXs are built on blockchain technology and are decentralised, meaning that they are not controlled by any single entity. This gives users more control over their assets and transactions, and reduces the risk of hacking and theft.
A DEX allows users to trade cryptocurrency directly with one another, without the need for a central authority or intermediary. This is achieved through the use of smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. These smart contracts are stored on the blockchain, which is a distributed ledger that records all transactions.
DEXs are built on different blockchain platforms such as Ethereum, TRON, EOS and more. The most popular DEXs are built on the Ethereum blockchain, as it has the largest number of decentralised applications (dApps) and the most active developer community.
One of the main advantages of DEXs is that they offer greater security than centralised exchanges. With a centralised exchange, users must trust the exchange to keep their assets safe. However, with a DEX, users have full control over their own private keys, which are required to access their assets. This eliminates the risk of a centralised exchange being hacked or going bankrupt, as users can always access and control their own assets.
Another advantage of DEXs is that they offer greater privacy and anonymity. With a centralised exchange, users must provide personal information and go through a know-your-customer (KYC) process. However, with a DEX, users can trade anonymously and don’t need to provide any personal information.
DEXs also offer a more decentralised trading environment, as they are not controlled by any single entity. This means that there is no single point of failure, and there is no central authority that can manipulate the market.
However, DEXs also have some disadvantages. One of the main disadvantages is that they often have lower trading volumes and liquidity than centralised exchanges. This can make it more difficult to find buyers and sellers for certain assets, which can increase the spread between the bid and ask prices.
Another disadvantage of DEXs is that they often have higher trading fees than centralised exchanges. This is because DEXs rely on blockchain networks, which require users to pay gas fees for executing smart contracts.
In conclusion, DEXs are a new type of cryptocurrency exchange that offers greater security, privacy and decentralisation than centralised exchanges. They are built on blockchain technology and rely on smart contracts for trading. While DEXs have some disadvantages such as lower trading volumes and higher trading fees, they are becoming increasingly popular among traders who value decentralisation, privacy and control over their own assets. As technology advances and more people are educated about the benefits of decentralisation, we can expect DEXs to continue to grow in popularity.