How does a decentralized exchange (DEX) operate compared to a traditional exchange?

» Technical Aspects
  • A DEX operates without a central authority, enabling peer-to-peer trading directly between users.
  • Traditional exchanges act as intermediaries, holding funds and facilitating trades, while DEXs allow for direct wallet-to-wallet transactions.
  • DEXs rely on smart contracts to enforce trading rules and execute trades, rather than relying on an institution's internal systems.

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How does a decentralized exchange (DEX) operate compared to a traditional exchange?

Man, this whole concept of decentralized exchanges or DEX as they're called has been bouncing around in my skull for a while now. But I still can't really wrap my head around how they even work. Like, you always hear people saying they're all the rage in the crypto world, right? Well, what I want to know is just how exactly a DEX operates compared to a traditional exchange. I mean, what's the big difference? How does the whole mechanism function? I'd love to hear any personal experiences or insights you might have on the matter. Any thoughts?

I find DEX to be unnecessarily convoluted and risky, especially for newcomers in the crypto space. Traditional exchanges, despite their flaws, offer a more structured and secure platform in my view.

A neutral aspect might be that DEXs eliminate the need for a central authority, which can potentially increase transparency and control for users. However, they can also be technically challenging and entail smart contract risks.

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