DEX: advantages and disadvantages of decentralized exchanges

Cryptocurrency trading is possible not only on centralized exchanges (CEX), but also on decentralized trading platforms (DEX). They have many advantages for trading digital assets.

Decentralized platforms have been flourishing since 2020. Among the advantages of working with them are anonymity, security, ease of trading and a high level of control over your assets.

The reason for the popularity is that decentralized platforms offer peer-to-peer transactions directly between users. At the same time, an intermediary - a third party - is not required to complete the exchange. This allows you to automate exchange processes and reduce commission costs.

DEXs are based on smart contracts. It is thanks to pre-programmed conditions that automatic exchanges are made and no intermediaries are required. Unlike CEX, on decentralized platforms, users have full control over their tokens.



How does DEX work?

The principle of the platform is very simple. Using the blockchain network, the platform finds a trader-seller and a trader-buyer, whose requests for the sale and purchase of cryptocurrencies match. They offer to make a deal.

On most platforms, a special AMM mechanism is used for this - an automatic market maker. It is used to set prices for various cryptocurrency assets.

Pros and cons of DEX

The main advantages of decentralized platforms are the complete anonymity of trading and 100% control over private keys. Other pluses:

  • DEXs do not store user data and do not store cryptocurrencies.
  • Verification is not required to work with the platform.
  • The intuitive interface facilitates the process of working with the exchange.
  • Since the exchange does not have a centralized governing body, regulators cannot prohibit its activities and freeze user funds.

The exchange of cryptocurrencies on decentralized exchanges has not only advantages. The disadvantage may be:

  • Lack of customer support.
  • Inability to deposit fiat currencies.
  • Direct trading only, no margin orders, etc.

Despite the disadvantages, trading on decentralized exchanges provides additional opportunities for trading cryptocurrencies. Users of the crypto market can get a liquid tool for earning. Therefore, working with DEX is popular with many cryptocurrency investors.

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CoinShark is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. This article is for informational purposes, prepared on the basis of materials and information from open sources. Cryptocurrency is a high-risk asset, investments in it can lead to losses. Readers should do their own research before taking any action.

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