CFA Level I · CFA Level I Exam · Introduction to Digital Assets
Compared with a centralized exchange, a decentralized exchange (DEX) most likely:
A decentralized exchange most likely settles trades through smart contracts instead of an intermediary operator. Users usually trade from their own wallets, whereas centralized exchanges generally take custody of deposited assets. Deposit insurance is not an inherent feature of a DEX.
- Asettles trades through smart contracts rather than an intermediary order book operatorCorrect
- Bguarantees deposit insurance on all traded assets
- Crequires users to transfer assets to the exchange operator before trading
Explanation
A DEX uses smart contracts, often with liquidity pools, so users trade from their own wallets. Centralized exchanges typically take custody of deposited assets. Neither provides a guarantee of deposit insurance by design.
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