Decentralized exchange (DEX) is a peer-to-peer exchange that enables users to trade cryptocurrency without the need for an intermediary.
Traditional, centralized exchanges are run by a third party that keeps track of all of its customers’ identities and information. This is a direct challenge to one of the principles of cryptocurrency in which anonymity should be an option for users.
Decentralized exchanges offer anonymity similar to normal crypto transactions and provide a non-custodial process. This means the asset being exchanged does not require the use of a middleman.
DEXs are vital parts of the next wave of development in crypto. However, truly decentralized exchanges (for example Radar Relay, which is built on the 0x protocol) is still very much in their infancy, and trading volumes on these platforms tend to be fairly low. Additionally, DEXs will face further challenges from regulators who viewed that decentralized exchanges should be subjected to the same oversight as their centralized rivals.