What is a DEX? When participating in investing in the cryptocurrency market, you will certainly hear the concepts of centralized exchange and decentralized exchange, also known as DEX. But you don’t know yet what is the nature and difference between centralized exchange.
1 – What is a DEX?
DEX stands for Decentralized Exchange, which means a decentralized cryptocurrency exchange built and operated on a blockchain technology platform.
Decentralized exchanges (DEXs) allow users to trade peer-to-peer (P2P) on the blockchain platform without going through the management of any organization.
2 – Advantages and disadvantages of DEX
2.1 – Advantages
Compared to centralized exchanges, Decentralized Exchanges do not need identity verification (KYC).
Do not keep user coins.
Tokens that have not been listed on centralized exchanges, users can still trade these tokens on the Decentralized Exchange.
2.2 – Disadvantages
Compared to centralized exchanges, DEX exchanges are not really user-friendly.
If the user forgets the DEX account key codes, the user’s coins will be permanently lost and cannot be recovered.
Trading volume and liquidity on Decentralized Exchanges is still too small.
High transaction fees.
3 – Operational nature
When a user creates a wallet on a decentralized exchange, a private key is issued. The coins that users deposit into the wallet will be owned by the user, not the DEXs.
Buy/sell orders on DEX are peer-to-peer (P2P), user transactions are only successful when the buyer/seller accepts to execute at that price.
4 – Difference between decentralized and centralized exchange
The most basic differences between a decentralized exchange (DEX) and a centralized exchange (CEX) are as follows:
Decentralized Exchange is not managed or controlled by an organization, the coins deposited in the Decentralized Exchange wallet are under the full control of the user.
CEX is managed and controlled by an organization, the coins deposited in the CEX wallet are stored and managed by CEX. Just like you depositing $1000 in a bank, this $1000 is stored and managed by the bank for you.