Decentralized exchanges, or DEXs, are platforms in which smart contracts match and execute orders on the order book. No single entity controls the data or has any access to wallet private keys. Should a DEX be shuttered, the wallets remain secure and untouched.
In theory DEXs offer a more ideal solution to the centralization problem. They typically have smaller fees than the centralized exchanges, or even no fees. Their smart contract code can be checked and verified independently by third parties (even you, if you know how to read code). And of course, the user maintains full control over their own wallet.
The downsides to DEXs, currently, are a combination of the lack of ease of use, low liquidity (volume on DEXs are usually fractions of those of centralized exchanges, which can make trading on your coin of choice tricky), and often there are limited trading pair options, which can sometimes mean treading a labyrinthine path to get to the currency you actually want to trade with. Another issue with DEXs is the inability to convert between fiat and cryptocurrency. And while smart contracts can be examined and validated, that does not mean they are immune from hacks. From Jacob Woods
“Although trusting a third party isn’t necessary, a lot of faith is put on the smart contract itself. Money can and has been stolen from decentralized exchanges despite the fact that many community members considered them unhackable.”
All that said, DEXs will continue to gain in importance and prominence as cryptocurrency industry matures and hopefully users will become more aware of the need for securing their own coins and doing their due diligence in protecting themselves from unnecessary losses.
Should you be interested in exploring DEXs on your own, I recommend IDEX
. Or you can just check out a list of 200 DEXs here
. I can’t recommend EtherDelta (or its cousin ForkDelta) as those platforms have notoriously confusing interfaces which have even given me scares). Obviously, DYOR and tread carefully no matter which platform you use. Be safe. Be secure. And good luck!