What is a decentralized exchange (DEX) and how does it differ from a centralized exchange?

A decentralized exchange (DEX) is a peer-to-peer platform that allows users to trade cryptocurrencies directly with one another without relying on a central authority or intermediary. Unlike centralized exchanges, such as Binance or Coinbase, where a central entity controls the platform and holds custody of users’ funds, DEXs allow users to retain control of their private keys and funds throughout the trading process. DEXs operate on blockchain networks, using smart contracts to facilitate trades and ensure transparency. They provide greater privacy and security, as there is no central point of failure, but they often have lower liquidity and less user-friendly interfaces compared to centralized exchanges.