A decentralized exchange (DEX) is a peer-to-peer (P2P) marketplace that connects cryptocurrency buyers and sellers. In contrast to centralized exchanges (CEXs), decentralized platforms are non-custodial, meaning a user remains in control of their private keys when transacting on a DEX platform. In the absence of a central authority, DEXs employ smart contracts that self-execute under a set of conditions and record each transaction to the blockchain. These trustless, secure transactions represent an accelerating segment of the digital asset market, and are pioneering new financial products.
Proton DEX uses order books to compile a record of all open buy and sell orders for a particular asset. The spread between these prices determines the depth of the order book and the prevailing market price. The orders information is held on-chain during trades, while user funds remain off-chain in user wallet.