A decentralized exchange or DEX is a place where people can go to trade cryptocurrencies without an intermediary. To better identify what a decentralized exchange is, it’s important to first understand how centralized exchanges work.
How Do Centralized Exchanges Work?
A centralized exchange such as Binance or Coinbase is a site or app where people can buy, sell, or trade cryptocurrencies and tokens listed on that exchange.
Let’s say you want to buy some Bitcoin.
You can go to an exchange, sign up by providing some banking details and identifying information, and deposit some cash. (Sometimes this process takes days, which is one drawback of centralized exchanges vs. DEXs.) The exchange will tell you the price—based on an “order book” of people buying and selling at different amounts—and you can make the transaction.
So, what happens next?
The exchange will show those Bitcoins in your account, and you can trade for other tokens on the exchange. But you don’t really hol
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