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How Does a Decentralized Exchange (DEX) Reduce Counterparty Risk Compared to a CEX?

DEXs are non-custodial, meaning users hold their keys. Trades are peer-to-peer via smart contracts, removing the exchange as a counterparty for custody.
Greeks.Live29.10.25

How Does a Decentralized Exchange (DEX) Reduce Counterparty Risk Compared to a CEX?

DEXs operate on a blockchain and use smart contracts to execute trades directly between users (peer-to-peer). This eliminates the need for a centralized intermediary to hold user funds.

Since the user maintains control of their private keys and funds at all times (non-custodial), the risk of the exchange being hacked or becoming insolvent and losing user assets is removed. The risk shifts from the intermediary to the smart contract code.

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