Decentralized exchanges (DEXs) allow users to trade cryptocurrencies directly from non-custodial wallets through smart contracts and liquidity pools, eliminating centralized intermediaries and custodial risks. DEXs operate through automated code, connect buyers and sellers directly, and offer access to a wide range of tokens without KYC requirements. However, they face challenges such as impermanent loss, smart contract vulnerabilities, network congestion, high fees, limited support, and code vulnerabilities. Despite these challenges, DEXs are a key component of the decentralized finance (DeFi) sector and are evolving as an alternative to traditional centralized exchanges.

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