Trading directly from your own wallet, with the exchange’s code as the only intermediary — no company ever holds your money.
A decentralised exchange (DEX) has no central operator custodying funds. Trades are executed by smart contracts — self-running code on the blockchain — connecting buyers and sellers directly. You keep control of your private keys throughout.
The trade-off runs the other way from a centralised exchange: DEXs typically offer access to a far wider range of tokens (including ones a CEX would never list), but with thinner liquidity, more complex interfaces, and none of a company’s customer support if something goes wrong.
Most DEXs (Uniswap, Curve, and the venues underneath aggregators like Dexscreener) don’t use a traditional order book at all — they use a “constant function market maker,” a formula that sets the price algorithmically from the ratio of two assets in a pool, with no buyer and seller ever needing to be matched directly.
Source: Angeris, G., & Chitra, T. (2020), “Improved Price Oracles: Constant Function Market Makers,” Proceedings of the 2nd ACM Conference on Advances in Financial Technologies.