# Decentralized Exchanges ⎊ Area ⎊ Resource 49

---

## What is the Architecture of Decentralized Exchanges?

Decentralized exchanges (DEXs) operate on a peer-to-peer model, utilizing smart contracts on a blockchain to facilitate trades without a central intermediary. Unlike centralized exchanges, DEXs do not rely on a traditional order book; instead, many employ automated market maker (AMM) protocols. This architecture allows for permissionless access and transparent transaction settlement directly on the ledger.

## What is the Custody of Decentralized Exchanges?

A defining characteristic of decentralized exchanges is their non-custodial nature, where users retain full control over their private keys and assets throughout the trading process. This eliminates the counterparty risk associated with centralized platforms holding user funds. The self-custody model enhances security by removing a single point of failure for asset management.

## What is the Mechanism of Decentralized Exchanges?

Trading on a DEX involves interacting with liquidity pools rather than matching buyers and sellers directly. Liquidity providers supply assets to these pools, earning fees from transactions. The price discovery mechanism on AMM-based DEXs is determined by a mathematical formula that adjusts the asset ratio within the pool based on trade size.


---

## [Support Levels](https://term.greeks.live/definition/support-levels/)

## [TWAP Strategy](https://term.greeks.live/definition/twap-strategy/)

## [Execution Certainty](https://term.greeks.live/definition/execution-certainty/)

## [Partial Fill](https://term.greeks.live/definition/partial-fill/)

## [Market Order](https://term.greeks.live/definition/market-order/)

## [Order Types](https://term.greeks.live/definition/order-types/)

## [Leverage Factor](https://term.greeks.live/definition/leverage-factor/)

## [Settled Funds](https://term.greeks.live/definition/settled-funds/)

## [Break-Even Price](https://term.greeks.live/definition/break-even-price/)

## [Equities](https://term.greeks.live/definition/equities/)

## [Trading Venue](https://term.greeks.live/definition/trading-venue/)

## [Spot Market](https://term.greeks.live/definition/spot-market/)

## [Smirk](https://term.greeks.live/definition/smirk/)

## [Put Writer](https://term.greeks.live/definition/put-writer/)

## [Fixed Income](https://term.greeks.live/definition/fixed-income/)

## [Contract Maturity](https://term.greeks.live/definition/contract-maturity/)

## [Liquidity](https://term.greeks.live/definition/liquidity/)

## [Buying Power](https://term.greeks.live/definition/buying-power/)

## [Leverage](https://term.greeks.live/definition/leverage/)

---

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---

**Original URL:** https://term.greeks.live/area/decentralized-exchanges/resource/49/