What is a decentralised exchange (DEX), and how is it different from a centralised one?

Smart contracts instead of a company

The BIS describes decentralised exchanges (DEXs) as marketplaces where trades happen directly between traders, and prices are set by automated mathematical formulas.¹ ethereum.org calls a DEX an Ethereum app that lets you swap tokens with others on the network.⁵

Uniswap is one example. Its documentation describes it as a set of smart contracts that let anyone swap tokens, add liquidity or create new markets directly on the blockchain.² It says a pool is just a smart contract that users operate by calling its functions.⁶ Module 4 explains smart contracts.

Uniswap's documentation says its core contracts cannot be upgraded once deployed. No one can pause them or reverse a trade, though Uniswap's governance can switch on protocol fees within set limits.² Other DEXs are built differently, so check each one's own documents.

You keep custody until you swap

On a centralised exchange you deposit first. On a DEX, ethereum.org says, "you never give up control of your assets".^3,7 Uniswap Labs, which runs a Uniswap website and app, says in its terms that it has no custody or control over what is in your wallet.⁸

The swap itself is one step. You choose the tokens and the amount, the protocol works out what you will receive, and the tokens you buy arrive in your wallet straight away.⁴ Uniswap Labs' terms warn that these transactions settle automatically and can't be reversed once confirmed.⁸

You still pay the blockchain's network fee, called gas, for each transaction.⁸ Module 5 explains gas.

No account, no gatekeeper

ethereum.org says DEXs are not subject to geographical restrictions like centralised exchanges: anyone can take part.⁵ Uniswap's documentation says its protocol has no ability to restrict who can use it.² That openness has a downside. Anyone can also create a new market, or a token with the same name as another, which Lesson 6 returns to.^2,9

Front-ends and contracts

Most people never call a smart contract directly. They use a website or app, often called a front-end or interface. The BIS says these apps are not strictly needed, since users could build their own, but they are the way in for all but the most expert users.¹

The front-end and the contracts are separate. Uniswap Labs' terms say its interface is distinct from the Uniswap Protocol and is "one, but not the exclusive" way to reach it. They add that Uniswap Labs does not control or operate the protocol.⁸

That split matters in practice.^8,10

• A front-end can add its own features. Uniswap Labs' terms say its products may show warning labels on some tokens.⁸
• A front-end can charge its own fee. Uniswap Labs had charged fees on its own interface. A governance proposal carried out in December 2025 said those fees would be set to zero.¹⁰
• If a website goes down, the contracts keep running. No one can pause them, and users can reach them through another interface.^2,8,1

Side by side

A DEX is not risk-free. ethereum.org warns that Ethereum products, like any software, can suffer from bugs and exploits.³ Lesson 6 covers the risks.