A DEX (Decentralized Exchange) is a cryptocurrency trading platform that operates through smart contracts without a central authority. Users trade directly from their wallets by interacting with liquidity pools, maintaining full custody of their assets until the moment of trade. DEXs offer greater privacy and control but typically have lower liquidity, higher transaction fees during network congestion, and require more technical knowledge than centralized exchanges.
Example:
On Uniswap, a user can swap 1 ETH (currently worth $4,200) for approximately 4,200 USDC directly from their MetaMask wallet. The trade happens peer-to-contract using a liquidity pool, costs roughly a few dollars in gas fees depending on network activity, and requires no account creation or identity verification.