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What are Decentralised Exchanges (DEXs)?
What are Decentralised Exchanges (DEXs)?

Learn about DEXs and Best Wallet's decentralised exchange, Best DEX.

Updated over a week ago

Decentralised exchanges (DEXs) have emerged as a cornerstone of the decentralised finance (DeFi) movement, offering users a private, anonymous way to trade their crypto.

DEXs are platforms that facilitate the peer-to-peer trading of cryptocurrencies without the need for intermediaries or centralised authorities.

Unlike traditional centralised exchanges, which rely on a central entity to manage order books and execute trades, DEXs operate on blockchain technology and smart contracts to enable trustless and permissionless trading.

Key features of DEXs

  • Decentralisation: DEXs thrive on a network that lacks a central control point, enhancing their resilience and security while making them resistant to censorship.

  • Non-Custodial Nature: Users maintain full control over their funds, trading directly from personal wallets, which significantly lowers the risk of loss due to hacks or exchange failures.

  • Transparency: Every transaction on a DEX is recorded on the blockchain, visible to anyone, fostering an environment of trust and openness.

  • Privacy: DEXs respect user privacy by eliminating the need for detailed identity checks, appealing to those valuing confidentiality and financial autonomy.

  • Global Reach: Accessible worldwide, DEXs offer a borderless trading experience, promoting financial inclusivity across different regions.

How do DEXs work?

Decentralised exchanges leverage smart contracts, which are self-executing contracts with predefined rules written on blockchain networks like Ethereum.

These smart contracts facilitate the trading of digital assets by automating order matching, asset swaps, and settlement.

When a user wants to trade on a DEX, they interact with the exchange’s smart contract through a user interface (UI) or a web application.

They specify the details of their trade, such as the assets to be exchanged and the desired price, and submit this information to the smart contract. The smart contract then executes the trade automatically, provided the specified conditions are met.

Since transactions on DEXs occur directly between users’ wallets, there is no need for an intermediary to hold custody of the assets or execute trades.

Instead, trades are settled peer-to-peer on the blockchain, eliminating counterparty risk and reducing dependency on centralised entities.

Challenges of DEXs

However, engaging with DEXs is not without its challenges:

  • Technical Complexity: Navigating a DEX can be daunting due to its reliance on blockchain technology and smart contracts.

  • Smart Contract Vulnerabilities: While generally secure, smart contracts are not immune to flaws. If exploited, these vulnerabilities can lead to substantial losses.

  • Liquidity: Often lower than centralised exchanges (CEXs), leading to potential price slippage. This depends on which DEX you use, and is less of a problem when trading the main cryptocurrencies like Ethereum ($ETH).

What is Best DEX?

Best DEX is a decentralised exchange integrated into Best Wallet, allowing users to execute transactions such as buying or swapping cryptocurrencies.

With Best DEX, users can access a wide range of cryptocurrencies and trade them directly from their Best Wallet app. This means that you no longer have to connect your wallet to a DEX, and instead, can seamlessly transact within Best Wallet.

Automatic integration for Best Wallet users

For users accessing Best Wallet via the mobile app, there’s no need for additional setup or configuration to access Best DEX.

By simply creating and using your Best Wallet, you are automatically connected to Best DEX, where you can explore a wide range of trading pairs and execute trades with ease.

However, if you do want to trade on the Best DEX website, you can use your Best Wallet's connect feature. This allows you to link your Best Wallet to Best DEX seamlessly, enabling you to access the decentralised exchange directly from your desktop or laptop browser.

To conclude

Decentralised exchanges represent a fundamental shift in the way digital assets are traded, offering users greater security, privacy, and financial autonomy.

By leveraging blockchain technology and smart contracts, decentralised exchanges like Best DEX enable trustless and permissionless trading, making it easy and private to swap your crypto.

As the DeFi movement continues to gain momentum, decentralised exchanges are poised to play a central role in shaping the future of finance.

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