A decentralized crypto exchange, also called a DEX, is a peer-to-peer (P2P) marketplace. It allows traders to buy and sell cryptocurrencies directly without relying on third parties. DEXs replace intermediaries such as banks, brokers, or payment services with self-executing smart contracts .
Decentralized Crypto Exchange: Introduction
Decentralized crypto exchanges were developed as an alternative to centralized crypto exchanges, offering direct peer-to-peer cryptocurrency trading and access to the growing decentralized exchange development finance space. Instead of a centralized operation, such as Coinbase, tasked with facilitating transactions, DEXs rely on smart contracts, programs that execute pre-programmed outcomes when certain requirements are met.
This is called non-custodial because DEX users have complete control over their cryptocurrency assets and their private keys , rather than handing custody over to a central organization.
CEX and DEX: The Main Differences
Development and Management – A centralized crypto exchange is developed traditionally using programming languages like Java or Python, similar to other applications like Twitter or Uber. Developers are responsible for maintenance, transaction processing, custody of funds, and much more.
A decentralized crypto exchange, on the other hand, is built on a blockchain network and is governed by hard-coded rules called smart contracts. A smart contract consists of code that contains specific requirements that trigger pre-programmed actions when they are met. These smart contracts are open source, meaning anyone can view their code and suggest improvements.
Involvement of fiat currencies – Decentralized cryptocurrency exchanges only allow the exchange of cryptocurrencies with each other; fiat currencies (US dollars, euros, etc.) are not involved. Centralized exchanges, on the other hand, offer services for purchasing cryptocurrencies with fiat currencies via bank transfer.
Included cryptocurrencies – Similar to traditional exchanges, centralized crypto exchanges typically include all major cryptocurrencies, while decentralized exchanges are usually specific to a blockchain ecosystem on which they are built.
Anonymity – Since fiat currencies (e.g. US dollars or euros) are involved, central crypto exchanges require KYC (Know-Your-Customer), the provision of personal information such as name, email address, telephone number and possibly a scan of a government-issued photo ID.
Transaction fees – The type and amount of cryptocurrency transaction fees vary between CEXs and DEXs. Centralized crypto exchanges typically charge a percentage service fee for each transaction, which usually varies based on trading volume to encourage larger transactions with higher monetary value.
Decentralized crypto exchanges, on the other hand, use the network fees of the blockchain network on which they are built. Network fees, as such, depend largely on network congestion and the size of the transfer. Transfers require more computing power and are more expensive to process. These fees are distributed among the network participants, or nodes, for verifying the transaction.
How does a decentralized crypto exchange work?
A DEX is a type of decentralized application and is governed by smart contracts. Smart contracts, in this context, represent a pool of assets. When users want to trade or exchange assets, they interact with a smart contract. This contract handles the locking and unblocking during a trade. A smart contract is a self-executing program and replaces the intermediaries typically responsible for facilitating transactions between two currencies.
How do Decentralized Cryptocurrency Exchanges Work?
Independent directories like CoinMarketCap list all decentralized crypto exchanges along with the cryptocurrencies they support. Users can browse the site and select a platform that best suits their needs based on their assets.
Access to decentralized crypto exchanges is via a decentralized crypto wallet, which allows users to send cryptocurrencies to the crypto exchange. On a DEX page, users can connect supported wallets, which they can top up beforehand via a centralized crypto exchange if necessary.
When users enter an amount to convert, they receive a breakdown of the transfer, including the associated transaction fee and the expected amount the beneficiary will receive.
Is The Future of Crypto Exchanges Decentralized?
Although a relatively new trend, decentralized crypto exchanges have recently gained significant traction. For example, DEX trading volume on the Ethereum network has grown from just $3 billion in 2019 to a staggering $620 billion in 2021. At the beginning of 2019, DEX transactions accounted for just 0.11% of global trading volume, which increased to 6% by August 2022.
Despite certain drawbacks, decentralized exchanges offer great value to the end user while remaining true to the core philosophy of blockchain: complete decentralization. Learn more about the latest trends here: Exchange Trends 2025.
A decentralized crypto exchange, also called a DEX, is a peer-to-peer (P2P) marketplace. It allows traders to buy and sell cryptocurrencies directly without relying on third parties. DEXs replace intermediaries such as banks, brokers, or payment services with self-executing smart contracts .
Decentralized Crypto Exchange: Introduction
Decentralized crypto exchanges were developed as an alternative to centralized crypto exchanges, offering direct peer-to-peer cryptocurrency trading and access to the growing decentralized finance space . Instead of a centralized operation, such as Coinbase , tasked with facilitating transactions, DEXs rely on smart contracts, programs that execute pre-programmed outcomes when certain requirements are met.
This is called non-custodial because DEX users have complete control over their cryptocurrency assets and their private keys , rather than handing custody over to a central organization.
CEX and DEX: The Main Differences
Development and Management – A centralized crypto exchange is developed traditionally using programming languages like Java or Python, similar to other applications like Twitter or Uber. Developers are responsible for maintenance, transaction processing, custody of funds, and much more.
A decentralized crypto exchange, on the other hand, is built on a blockchain network and is governed by hard-coded rules called smart contracts. A smart contract consists of code that contains specific requirements that trigger pre-programmed actions when they are met. These smart contracts are open source, meaning anyone can view their code and suggest improvements.
Involvement of fiat currencies – Decentralized cryptocurrency exchanges only allow the exchange of cryptocurrencies with each other; fiat currencies (US dollars, euros, etc.) are not involved. Centralized exchanges, on the other hand, offer services for purchasing cryptocurrencies with fiat currencies via bank transfer.
Included cryptocurrencies – Similar to traditional exchanges, centralized crypto exchanges typically include all major cryptocurrencies, while decentralized exchanges are usually specific to a blockchain ecosystem on which they are built.
Anonymity – Since fiat currencies (e.g. US dollars or euros) are involved, central crypto exchanges require KYC (Know-Your-Customer), the provision of personal information such as name, email address, telephone number and possibly a scan of a government-issued photo ID.
Transaction fees – The type and amount of cryptocurrency transaction fees vary between CEXs and DEXs. Centralized crypto exchanges typically charge a percentage service fee for each transaction, which usually varies based on trading volume to encourage larger transactions with higher monetary value.
Decentralized crypto exchanges, on the other hand, use the network fees of the blockchain network on which they are built. Network fees, as such, depend largely on network congestion and the size of the transfer. Transfers require more computing power and are more expensive to process. These fees are distributed among the network participants, or nodes, for verifying the transaction.
How does a Decentralized Crypto Exchange Work?
A DEX is a type of decentralized application and is governed by smart contracts. Smart contracts, in this context, represent a pool of assets. When users want to trade or exchange assets, they interact with a smart contract. This contract handles the locking and unblocking during a trade. A smart contract is a self-executing program and replaces the intermediaries typically responsible for facilitating transactions between two currencies.
How do Decentralized Cryptocurrency Exchanges Work?
Independent directories like CoinMarketCap list all decentralized crypto exchanges along with the cryptocurrencies they support. Users can browse the site and select a platform that best suits their needs based on their assets.
Access to decentralized crypto exchanges is via a decentralized crypto wallet, which allows users to send cryptocurrencies to the crypto exchange. On a DEX page, users can connect supported wallets, which they can top up beforehand via a centralized crypto exchange if necessary.
When users enter an amount to convert, they receive a breakdown of the transfer, including the associated transaction fee and the expected amount the beneficiary will receive.
Is The Future of Crypto Exchanges Decentralized?
Although a relatively new trend, decentralized crypto exchange development company have recently gained significant traction. For example, DEX trading volume on the Ethereum network has grown from just $3 billion in 2019 to a staggering $620 billion in 2021. At the beginning of 2019, DEX transactions accounted for just 0.11% of global trading volume, which increased to 6% by August 2022.
Despite certain drawbacks, decentralized exchanges offer great value to the end user while remaining true to the core philosophy of blockchain: complete decentralization. Learn more about the latest trends here: Exchange Trends 2025.
