What Are Decentralized Exchanges

Regular exchanges like Coinbase or Binance hold your coins in their accounts — you could wake up to find your account frozen. Decentralized exchanges (DEXs) work differently: trades happen directly between wallets.

DEXs let you trade cryptocurrency without intermediaries while keeping full control of your funds.

Definition

A decentralized exchange is cryptocurrency trading directly between wallets without an intermediary. Instead of registering an account, your money always stays in your wallet.

Imagine the difference between a bank and exchanging currency with someone on the street. At a bank, you open an account, deposit money, and the bank controls it. With a street exchange, you simply swap bills hand-to-hand — nobody holds your money.

A DEX works like a street exchange, except instead of people, a smart contract executes the trade. A smart contract is a program on the blockchain that automatically performs exchanges according to set rules. Connect your wallet, choose tokens, confirm — done.

Key takeaway: your coins never leave your wallet until you decide to trade them.

Why Use DEX

Three situations where DEX solves problems better than traditional exchanges:

Access to new tokens. Uniswap lists over 10,000 tokens, while Coinbase offers around 300. New projects launch on DEX first, then (if they're lucky) get listed on centralized exchanges later.

No registration required. Connect MetaMask and start trading immediately. No need to upload your passport, wait a week for verification, or explain where your money came from. Unlike centralized exchanges that require KYC procedures and documentation, DEX platforms provide full access without identity verification.

Complete control of your funds. Coinbase or Binance can freeze your account "for review" for months. This can't happen on DEX — the coins stay in your wallet under your control.

Key takeaway: Use DEX for rare tokens, instant access, and complete control over your money.

Disadvantages

Four serious downsides of DEX that enthusiasts don't mention:

High network fees. Swapping €100 on Ethereum costs €2-5 in gas alone, plus a 0.3% DEX fee. On small amounts, fees eat up your profits.

No customer support. Make an address or network mistake and lose your money forever. Technical support won't recover transactions or reverse mistaken transfers. This is a critical difference from centralized exchanges, where you can contact support for help.

Fake scam tokens. Anyone with a smart contract can create a fake USDT. Beginners buy fakes, thinking they're saving on fees.

Complex interface. You must connect your own wallet, verify contract addresses, and calculate gas fees. One mistake and you lose your funds.

Key takeaway: DEX requires careful attention and technical knowledge.

Choosing a DEX

Choose a DEX based on the network where you already hold coins — don't overpay for bridges:

For beginners: You can start with Polygon or Arbitrum. Ethereum fees only make sense for amounts above €500.

Key takeaway: Choose a DEX that matches your token's network. Use cheaper networks for learning.

Step-by-Step Guide Using Metamask

Step 1: Prepare Your Wallet (5 min)

Install MetaMask → add the required network → fund your wallet with tokens and gas (ETH for Ethereum, MATIC for Polygon). Keep €5-10 worth of native coins for transaction fees.

Step 2: Connect to the DEX (2 min)

Open Uniswap → click "Connect Wallet" → select MetaMask → confirm the connection in the popup window.

Step 3: Set Up the Swap (2 min)

Select your "From" token → enter the amount → choose your "To" token. The interface will display the exchange rate and final amount.

Step 4: Review the Terms (5 min)

Check the rate on CoinGecko → compare it with the DEX (up to 1-2% difference is normal) → make sure the fees are reasonable. When choosing a DEX, it's important to check not only prices but also apply security practices: ensure you're using official addresses and not connecting to fake websites.

Step 5: Confirm the Swap (5 min)

Click "Swap" → confirm in MetaMask (click "Confirm") → wait for execution (1-5 minutes).

Step 6: Verify the Result (1 min)

Tokens will appear in your wallet automatically. If you don't see them, add the token using its contract address in MetaMask settings.

Key takeaway: the entire process takes 15-20 minutes. The most important thing is to carefully verify token addresses.

Cost

Real calculation: swapping €100 USDC for ETH:

On Ethereum network:

• Gas: €3 (at standard network load)

• Uniswap fee: €0.30 (0.3%)

• Total: around €103.30

On Polygon network:

• Gas: €0.002 (virtually free)

• QuickSwap fee: €0.25 (0.25%)

• Total: €100.25

Difference: €3 savings on Polygon. For amounts up to €500, Ethereum eats up 2-6% of your money just in fees.

Key takeaway: for amounts up to €500, use cheaper networks — you'll save significantly.

Common Mistakes

Golden rule: When in doubt about a token, don't buy it. You can't recover lost funds.

Key takeaway: 90% of beginner losses come from careless token selection.

Alternatives

Four situations when a centralized exchange is more convenient than a DEX:

Buying popular coins (BTC, ETH, SOL) — Kraken or Coinbase offer simpler interfaces and customer support. You're a beginner and worried about making mistakes — CEX platforms are safer thanks to customer service. You need to withdraw to a bank card — you can transfer directly to euros on Revolut or N26 for 1-2%. Small amounts on Ethereum network — DEX fees will eat up to half your funds.

Key takeaway: DEX for experienced users and rare tokens, CEX for everyday transactions.

Verdict

Choose your strategy based on portfolio size:

Under €500: Use Polygon + QuickSwap, start with €20, then learn contract verification on Polygonscan.

€500-5000: Combine cheap networks for experiments and Ethereum for serious trades. Always verify token addresses on CoinGecko.

€5000+: Start with Ethereum and Uniswap for maximum liquidity. Use hardware wallets for security.

Disclaimer: This article is for informational purposes only and is not a financial recommendation. Cryptocurrency investments carry high risks. Always conduct your own research and consult with financial advisors before making investment decisions.