OCT 4, 2026
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A decentralized exchange, or DEX, lets you trade from your own wallet with smart contracts holding your collateral instead of a company. Derivatives DEXs like Aevo add an order book and leverage on top. This lesson explains the differences from a centralized exchange and what to watch for. Aevo is one example: a hybrid perps dex that matches orders off-chain and settles on-chain.
IN THIS LESSON
On a DEX, smart contracts hold your collateral instead of a company.
Most leading derivatives DEXs match orders off-chain for speed and settle on-chain for transparency.
Order books, AMMs and request-for-quote are three ways of making a market.
A DEX removes company risk and adds responsibility for your own security.
01
Centralized and decentralized exchanges
Parameter
Centralized exchange
Decentralized exchange
Who holds your funds
The company
Smart contracts
Account
Sign-up with identity checks
Connect a wallet
Order matching
The company's servers
On-chain, or off-chain with on-chain settlement
Main risk
The company fails or freezes funds
Smart contract bugs and your own key security
On a centralized exchange, a balance is a promise from a company. On a DEX, it’s a position in a contract you can inspect.
02
How a trade moves through a hybrid DEX
Matching every order on-chain is too slow for derivatives. Aevo and most leading derivatives DEXs use a hybrid design: orders match off-chain at exchange speed, and settlement happens on-chain. Follow one order through the system.
The hybrid model: off-chain matching, on-chain settlement
Simplified. Matching latency reflects Aevo's published sub-10ms figure; rollup and Ethereum finality take longer and vary.
Aevo settles on its own rollup, the Aevo L2, which posts to Ethereum. Your collateral stays in smart contracts the whole time.
03
Three ways to make a market
An exchange needs a way to set prices and a party to take the other side. Compare the three models used for on-chain options and perps.
Three ways to make a market in on-chain options
Market makers posting live bids and asks
Professional market makers, who hedge elsewhere
Derive, Aevo, Kyan, Paradex
AMM. A formula inside a contract sets the price, and passive liquidity providers take the other side.
Order book. Market makers post live bids and asks, and professionals hedge their own risk.
RFQ. A trader requests a quote and dealers compete to price that exact trade.
Aevo runs an order book for its main markets and an RFQ desk, Aevo OTC, for trades the book can’t handle.
04
What can go wrong on a DEX
Smart contract risk. Bugs in a contract can lose funds. Audits reduce the risk and don’t remove it.
Key security. If someone gets your wallet’s keys, there’s no support desk to reverse it.
Infrastructure risk. Off-chain matching and a rollup add components that can fail.
Leverage. The exchange’s design doesn’t change what leverage does to losses. See leverage and margin.
05
Getting started safely
Use a wallet you control and keep the recovery phrase offline.
Start with a small deposit to learn the interface.
Use testnet to practice. Aevo’s MCP server has a full testnet stack, and there is a testnet exchange too.
Read the market’s specification before trading it.
In a hybrid derivatives DEX, where does order matching happen?
Hybrid designs match orders off-chain for speed and settle on-chain so collateral stays in smart contracts.
What is the main new risk you take on when you move from a centralized exchange to a DEX?
A DEX removes company risk. It adds smart contract bugs and the need to secure your own wallet.
WHERE TO GO NEXT
Trading leveraged contracts with no expiry? Aevo runs a perps dex with on-chain settlement and 20x on BTC and ETH. If you want the option itself, Aevo is an options dex. Every cost of a trade, from maker and taker fees to funding and liquidation, is in the fees lesson. New to derivatives? The crypto derivatives guides take you from your first perp to hedging in seven short lessons.
06
Frequently asked questions
What is a DEX?
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Is Aevo a DEX?
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Do I need identity verification on a DEX?
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Are DEXs safer than centralized exchanges?
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What is a rollup?
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Put the lesson to work
Practice on testnet or start small on mainnet.
Launch Exchange ↗
LEVEL
BEGINNER
TIME
10 MINUTES
PRIOR KNOWLEDGE
NONE
WORKED EXAMPLES
ILLUSTRATIVE
LEARN / DEX / LESSON 6
This lesson is for education only and isn’t financial advice. Leveraged products can lose more than you expect, quickly. Worked examples are simplified and use illustrative numbers.