What Is a ‘Decentralized Exchange’ (DEX) in Cryptocurrency?
A DEX is a peer-to-peer marketplace that allows users to trade cryptocurrencies directly without an intermediary, unlike a centralized exchange. It operates via smart contracts on a blockchain, giving users custody of their funds and significantly reducing counterparty risk and censorship.
Glossar
Single Point of Failure
Concentration ⎊ In crypto derivatives, this risk materializes when excessive collateral or governance control resides with a small number of entities, such as a few large liquidity providers or key developers.
Counterparty Risk
Exposure ⎊ Counterparty risk represents the potential loss incurred when a trading partner defaults on their contractual obligations.
DEX
Architecture ⎊ Decentralized exchanges, or DEXs, represent a fundamental shift in financial market structure, enabling peer-to-peer trading of crypto assets without intermediaries.
Smart Contracts
Function ⎊ Smart contracts are self-executing agreements with the terms of the agreement directly written into lines of code, residing on a decentralized ledger.