A decentralized exchange is a peer-to-peer marketplace where transactions occur directly between cryptocurrency traders. It fosters financial transactions that are not officiated by banks or any other intermediary. Decentralized Exchange fulfills one of the core possibilities of cryptocurrency by breaching the need for intermediary. Unlike centralized exchanges, DEX doesn't allow exchanges between fiat and Cryptocurrency tokens. They solely trade one cryptocurrency token for another cryptocurrency token. The exchanges done in DEX are settled on the Blockchain unlike the centralized exchange where all transactions are handled by the exchange itself via an order book where a price is established based on the buy and sell orders. Decentralized Exchanges are simply a set of smart contracts- A program that automatically executes actions according to terms of a contract which establish the cryptocurrency price in accordance to some algorithms. The fact that DEX is built on open source code makes it easier for developers to build on the existing code and create competing projects.
There are a few benefits of using decentralized Exchange; These are:
Wide range of tokens : Decentralized Exchange offers the possibilities of finding a token at its infant stage. There are a limitless range of tokens from the well-known to the weird and totally random. This is because anyone can mint an Ethereum base token and create a liquidity pool for it.
A bit secure from hackers: Since tokens are stored in a user's wallet, the possibility of hacking is low and Dex reduces the possibility of one party defaulting (mostly the Central authority)
Decentralized Exchange allows anonymity, it doesn't require an individual personal information to be able to use it.
As the world is developing, gradually there would be no need for a centralized body especially in the financial sections. DEX however is a utility in this modern world providing a speedy transaction, peer-to-peer exchange and anonymity, however, allowing anyone with a smartphone to trade. Examples of DEX are uniswap, sushi swap- which utilize the Ethereum Blockchain, hive-engine, blocktrade, etc.