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Decentralized exchanges are decentralized financial (Defi) platforms where cryptocurrency is traded through peer-to-peer transactions in exchange for other cryptocurrencies for an equivalent value.
These service providers are not governed by a centralized authority — as opposed to a centralized exchange — and therefore require no personal information to set up an account as it works purely through connecting one’s hot wallet.
In many ways, this makes decentralized exchanges safer and mitigates the risk of market manipulation and being hacked as there is no transfer of assets to a third party like with a centralized exchange.
Complete decentralization is not possible for the time being as it’s still necessary to use centralized exchanges to initially fund a wallet in exchange for fiat currency, but creators and collectors can benefit from these platforms by being able to:
- Trade cryptocurrency with cryptocurrency to receive the equivalent value thereof and diversify your portfolio
- Stake NFTs with selected DEXes to lock up NFTs and get more rewards for not selling them off
- Incredibly high interest staking to make more cryptocurrency from your portfolio as opposed to simply “hodling” it long-term in your wallet (holding on for dear life)
* high-interest Defi products are risky, DYOR before investing
Want to learn more about decentralized exchanges? Check out our review here.