Decentralized exchanges

In decentralized exchanges (DEXs) all transactions have no centralized authority, so anonymity is a differentiation between DEXs and centralized exchanges.

Centralized exchanges require their users to fill out KYC (know your client) application forms before they start trading on their platforms.

But the key difference with centralized exchanges is that DEXs do not own any money and they can’t exchange FIAT currency.

They must therefore use tools called “liquidity pools” to allow users to buy and sell cryptocurrencies.

Liquidity pools are crypto assets locked in user contracts so that others can use them for exchange.

They are a key concept of decentralized finance (DeFi). When pools linked to a cryptocurrency are highly liquid, traders will not experience much slippage and the asset will acquire stable value. In DEXs to start trading the only need is to have a wallet