Decentralized exchanges (DEX) are a type of cryptocurrency exchange that allows for peer-to-peer cryptocurrency transactions without the use of a middleman. Decentralized exchanges can also prevent price manipulation and fake trading volume through wash trading, and are more anonymous than centralised exchanges with KYC requirements. A DEX can yet have centralised components, meaning that a central authority retains some control over the exchange.

A blockchain or distributed ledger replaces the conventional third-party entities that would normally manage the security and transfer of assets in transactions done through decentralised exchanges. Smart contracts and order book relaying are two prominent means of functioning, although there are many other options available, each with varying degrees of decentralisation.

DEXs interface with externally owned wallets and trades are self-executed via smart contracts. By owning your private keys, centralised exchanges act as a custodian for your cash. Although you must give up control of your private keys, centralised exchanges provide trust and security.

DEXs employ the same "gas" cost structure as the Ethereum blockchain they’re built on in the absence of a middleman. Exchanges on DEXs are charged at a low rate of roughly 0.3 percent. These prices change in relation to network utilisation, but they are still significantly less than the expenses of centralised alternatives.

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