A Decentralized Exchange (DEX) is a platform that enables users to trade cryptocurrencies directly with each other without the need for an intermediary or central authority. DEXs operate on blockchain technology, utilizing smart contracts to facilitate secure and transparent transactions. Unlike traditional exchanges, where the exchange controls the order book and holds users' funds, DEXs allow users to maintain control of their private keys and funds, significantly reducing the risk of theft from exchange hacks.

DEXs support a wide range of trading pairs and often use liquidity pools or Automated Market Makers (AMMs) to ensure liquidity for trades. Users can also become liquidity providers by depositing assets into these pools, earning trading fees in return. The decentralized nature of DEXs aligns with the ethos of blockchain and cryptocurrency, promoting trustless transactions and increased privacy. However, users of DEXs should be aware of the risks, such as smart contract vulnerabilities and lower liquidity compared to centralized exchanges, which can lead to higher price slippage.

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