Decentralized exchange (DEX).
In plain English
A decentralized exchange, or DEX, is a set of smart contracts on a blockchain that lets people swap tokens directly from their own wallets. Instead of an order book run by a firm, most DEXs use liquidity pools: people deposit pairs of tokens, and a pricing formula sets the rate based on how much of each token sits in the pool. A trader pays a pool fee plus the network fee for the transaction. There is no account to open and no service desk, because no company sits in the middle. A confirmed swap cannot be reversed by anyone.
01Why it matters
On a DEX the trade is final the second it confirms, so the protections a person expects from a broker or a bank, reversals, error resolution, and account recovery, are not part of the design.
02The math, step by step
Say a pool holds 100 units of token A and 200,000 dollars of a stablecoin, an implied price of 2,000 dollars per token. A trader swaps one token and pays a 0.3 percent pool fee, 6 dollars, plus a 4 dollar network fee. That 10 dollars is 0.5 percent of the trade, before any price move the swap itself causes.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
It is not a centralized exchange. A centralized exchange is a company that holds customer coins, keeps an internal ledger, and can freeze or correct activity on its own books. A DEX is code. It never takes custody, and it cannot undo a confirmed transaction.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice