What is DEX

The essential difference between CEX and DEX is whether users' funds are custodial or non-custodial. Decentralized exchanges are not controlled by any central entity, reducing the counterparty risk by eliminating or minimizing the use of intermediaries.

DEX users do not need to give control over their assets to any custodian. They can trade directly from their own wallets by interacting with smart contracts. As a result, DEXs are permissionless - their utilities are open to everyone who has a crypto wallet, with no need to KYC or register.

Currently, due to the speed limit on blockchains such as Ethereum, most DEXs such as Curve, Uniswap, PancakeSwap, and Balancer adopted an innovative market-making strategy called "automated market maker (AMM)" that is different from the order books matching model. Meanwhile, there are also DEXs using order books such as dYdX.

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