Key Takeaways
Quick answer
A DEX, or decentralised exchange, lets you swap crypto tokens straight from your own wallet through smart contracts, without handing your coins to a company. Many use pools of deposited tokens instead of an order book. The US Treasury notes that DEX users are often not asked for personal information.
- A DEX lets you swap tokens from your own wallet through smart contracts.
- Many DEXs price trades from liquidity pools funded by other users, who earn the swap fees.
- Code exploits, irreversible transactions and fraudulent tokens are the main risks.
How is a DEX different from a centralised exchange?
The ethereum.org glossary calls a DEX “A type of Ethereum app that lets you swap tokens with peers on the network.” A centralised platform, by contrast, is a company that usually holds your coins for you.
| Centralised exchange | DEX | |
|---|---|---|
| Who holds the coins | The platform | You, in your wallet |
| Identity checks | Usually required | Often none |
| Pricing | Order book | Order book or liquidity pool |
For the first column, see what a crypto exchange is; for who controls the keys, see custody.
How does a swap on a DEX work?
On pool-based DEXs, other users deposit pairs of tokens. Uniswap’s documentation explains: “Swaps execute against a passive pool of liquidity, with liquidity providers earning fees proportional to their capital committed.” You approve the swap in your wallet, pay a swap fee to those providers plus the network’s gas fee, and accept some slippage.
What are the risks of using a DEX?
- Code exploits. The US Treasury’s 2023 DeFi risk assessment says: “In code exploits, hackers find vulnerabilities in the code of smart contracts and leverage them to remove funds from DeFi services without authorization.”
- No undo. ethereum.org states that interactions with smart contracts are irreversible.
- Fraudulent tokens. Treasury describes rug pulls, where a scammer raises funds in a seemingly legitimate project and then disappears with them.
- Self-custody. If you lose your private key, nobody can restore access.
Frequently asked questions
Do I need an account to use a DEX?
Usually you connect a self-custody wallet instead of opening an account. That is also why there is typically no support desk to reverse a mistaken swap.
Are DEXs outside the law?
Not automatically. The US Treasury says a DeFi service that functions as a financial institution under US law must meet anti-money-laundering obligations, whether it is centralised or decentralised.
Article Sources
4 sources
Blockhorizon checks every figure, date and quotation against primary sources: regulators, statistics bodies and original technical documents. Read our editorial policy.
- ethereum.org, Ethereum Glossary — ethereum.org (accessed 2026-10-02)
- Uniswap Labs documentation, Swaps (protocol concepts) — docs.uniswap.org (accessed 2026-10-02)
- US Department of the Treasury, Illicit Finance Risk Assessment of Decentralized Finance (Apr 2023) — home.treasury.gov (accessed 2026-10-02)
- ethereum.org, Introduction to smart contracts (updated Feb 2026) — ethereum.org (accessed 2026-10-02)