They’re faster. They’re Cheaper. They’re trustless. They’re anonymous. Decentralized exchanges (DEX) are revolutionary in their essence.

Aimed at freeing individuals from intermediaries, centralized authoritarian entities, and censorship, DEXs allow for its users to make peer-to-peer transactions effortlessly. Their pros are evident but in some of them one might also find some underlying cons.

There is no central authority

Decentralized exchanges work without a central authority or ruling entity, instead they replace those with smart contracts which are pieces of code that allow two parties to enter an agreement.

It mainly works as a legal agreement, the only difference being that it is written in code. As such, if both parties act accordingly, the smart contract will operate exactly like it should.

However, if one of the parties attempts to behave in a mischievous way in what concerns the terms of the contract, then the smart contract will not allow for it to happen and can even return the other party its money back.

But… That also means that it’s all on you. Sure. it might not be necessary to submit a social security number, fingerprints, profile pictures, not even a name. This type of data is known as KYC info (know your customer info) and not having to share it, is a major feature of decentralized finance because you will remain anonymous.

But that also means that there is no customer support. That’s right. There is just code.

If you have an issue, you are most likely to be on your own as there is nobody to call or message about it.

With that said, it is not rare for community forums to pop up every now and then and offer help, reddit being the prime example.

However, if you do something wrong like buying a scam coin or sending your coins to a different address, it will be on you, so remember to double check everything.

They are lightning fast

DEXs are insanely fast. Much faster than your standard centralized exchange, which, in turn, allows you to transfer your tokens at lightning-fast speeds. Moreover, there is the added bonus of charging very, very small fees compared to their centralized counterparts.

But… you might not be entirely free to trade what you want. Decentralized exchanges have a major limitation as they will only allow you to swap your crypto for other crypto and both of these are required to be on the same blockchain.

Even if your preferred platform features many blockchains, you still will not be able to swap between those blockchains, meaning that, at least for the time being, you are bound to stay within the realm or ecosystem of the blockchain of the tokens that you currently have.

Moreover, you must use a hot storage device, meaning that when using a decentralized exchange, you are required to connect a wallet either through your computer or via extensions.

Their code is open source

Having no central authority means that you do not have to trust anything else but the code and, as we all know, code is much more reliable than humans.

Moreover, the code is open source, meaning that you can actually take a look at it if you want and that developers will certainly double check every single line before actually committing to using it.

But… Open code doesn’t necessarily correlate with safety. Open code is a double-edged sword as by definition anyone can check the code, regardless of their intent. As such, hackers can find exploits and attack the blockchain.

Wrapping up

Decentralized exchanges are here to stay but they are not entirely what they’re made out to be, YET! Industry experts are confident that issues like these will be addressed. Regardless, the key to dealing with DEXs is simple: it’s all on you.

Double check everything and make sure that you know what you’re doing because a smart contract will only execute whatever it is written on it.

No more, no less.