In plain English
What Decentralized exchange means
A DEX lets users trade directly from their wallets by interacting with on-chain code. The exchange logic may use an automated market maker, an order book, or another protocol design, but the user generally keeps control of the wallet and signs the trade themselves. Settlement happens according to the protocol’s rules.
Why it matters
DEX structure affects custody, execution path, and how liquidity is provided. It can reduce dependence on a single operator, but it can also introduce smart-contract, network, and pricing risks. Knowing whether a platform is a DEX helps users understand who controls funds and how trades are formed.
Example
A user swaps 1 ETH for USDC through a DEX. The wallet signs a transaction that calls the protocol contract, which updates balances according to its pricing logic. No exchange employee manually matches the trade. This is simplified and does not cover fees or slippage.
Quick answers
Common questions
Are all DEXs non-custodial?+
Most are designed that way, because users usually sign trades from their own wallets rather than deposit assets into a company-controlled account.
Do DEXs use order books or pools?+
Both models exist. Some DEXs route trades through liquidity pools and automated market makers; others use on-chain order-book designs.
Sources