DEX stands for ‘decentralized exchange,’ where users can trade and exchange cryptoassets (coins and tokens) directly, with no intermediaries such as the exchange itself or a broker. Users don’t have to keep their cryptoassets at the exchange unless they want to. The blockchain fulfills the role of the intermediary and guarantor of the deal’s completion on a DEX.
In fact, a DEX is a marketplace where any person with access to the Internet can trade. And there is no need to generate accounts or obtain permission from the exchange. Technically speaking, a DEX is a set of smart contracts, or software which, when specified conditions occur (for example, when a user’s an order to sell or buy tokens is received), automatically performs the functions in its programming. No one and nothing has the technical capability to prevent a user from selling or buying tokens on such an exchange. Moreover, no one and nothing can block or cancel the user’s operation. This is what separates a DEX from the centralized exchanges (CEX).
The smart contract CANNOT fail to perform an operation or perform it in a way that differs from how the user instructed. As a rule, the smart contracts of decentralized exchanges are open-source software, meaning that any person can check the source code of the smart contract and make sure that the contract really contains only the stated functions.
As it happens, decentralized exchanges most often use Ethereum Blockchain, but new DEXs that work on different blockchains are appearing. For example, STON.fi works on the TON Blockchain. It offers a few advantages over Ethereum, such as higher speeds and practically zero transaction fees.
We will go through the advantages and limitations (which do exist!) of DEX in separate posts.
If you are a beginner and want to find out if a particular exchange is a DEX or a CEX, you can check the lists at coinmarketcap: DEXs, CEXs. You can also try to conduct an operation on the exchange you want to check. If the exchange requires you to register, it is most likely a CEX.