A decentralised exchange (DEX) is a platform that lets users swap tokens directly from their own wallets, with no company holding their funds or running an order book. Trades execute through smart contracts, and the DEX typically uses an automated market maker to set prices.
The key advantage is non-custody: because funds never leave your wallet until the moment of the swap, a DEX cannot be hacked in the same way an exchange can — there is no single pool of user funds to steal. There is also no KYC or account required.
The trade-offs are gas fees, slippage in thin pools, and smart-contract risk. A bug in the DEX contract can drain liquidity pools, as multiple high-profile exploits have shown. "Non-custodial" removes one trust problem while adding others.
Worked example
Swapping ETH for USDC on Uniswap happens directly from your wallet via a smart contract, with no Uniswap account or KYC needed.
Related guides
This definition is general education, not investment advice. Markets — especially crypto — are volatile and you can lose money. Please read our disclaimer and see our methodology.