Centralized vs Decentralized cryptocurrency exchange

Centralized vs Decentralized cryptocurrency exchange

By Cryptoamateur | Cryptoamateur | 28 Oct 2021

Attention! This article is for informational purposes only and does not contain recommendations or calls to action.


Recently, more and more newcomers have come to the cryptocurrency market who did not have previous experience of investing in cryptocurrencies. Many people want to buy, sell and exchange cryptocurrencies and are faced with difficult choices about "where and how to do it?". A large number of platforms provide their services for the trade, exchange and storage of cryptoassets. The main players in this area of ​​service delivery are centralized (CEX) and decentralized (DEX) exchanges. It is very difficult for beginners to make a choice for themselves among the huge number of offers. Which exchange to choose: (CEX) or (DEX)?


In this article, I will try to explain in detail the main differences between these platforms and find out which platforms are best for trading, exchanging and protecting your assets by comparing the main characteristics of each of them.


So what exactly is a Centralized Exchange (CEX)?


A centralized exchange is an online platform that provides a wide audience with access to Bitcoin, Ethereum and other cryptocurrencies, operated by a single company that mediates the trading process. Control over trade and exchange operations, safety of funds, customer service rests entirely on the shoulders of the exchange administration. In exchange for providing such a

service, the exchange charges a trading commission. A centralized exchange is a kind of gateway for a beginner who wants to enter the world of cryptocurrencies and who needs a clear interface that connects the traditional economy with cryptocurrency. Thus, CEX can be compared to brokerage transactions between buyers and sellers.

Great examples of CEX are:  Binance, Coinbase, etc.


CEX exchanges have such inherent characteristics as:

  • The business model of CEX is comparable to that of banks, since the exchange stores funds and private keys,
  • CEX adheres to legal regulations by forcing users to comply with KYC and AML policies.
  • A variety of services and tools are available to users, one of which is margin trading.
  • Basically, CEX supports both digital and fiat assets, offering users credit card deposits and withdrawals, and other payment options.
  • The CEX exchange charges a transaction fee.
  • Centralized servers increase transaction speed.
  • Nice interface allowing anyone to navigate easily and trade cryptocurrency effortlessly.

You should also be aware of the likelihood of exchange hacking and theft of your personal funds, and possible government bans.

Now let's talk about the decentralized exchange (DEX)

A decentralized exchange does not have any governing body and is already essentially different from a centralized exchange, DEX works on the P2P principle. To trade on a decentralized exchange, you do not need to register and pass KYC. Based on this, the exchange does not have and does not store any data about users. To trade on a decentralized exchange, you just need to create and connect a cryptocurrency wallet. Since the exchange does not store funds, therefore, you are solely responsible for the safety of your cryptocurrency. When trading, you pay commission solely for the transaction. The size of the commission is very dynamic here and will mainly depend on the load on the blockchain network. There is no middleman between the seller and the buyer who charges an additional commission. In addition, many DEX exchanges offer pharming and staking options. In theory, decentralized exchanges have lower fees than centralized ones. But in practice, everything may be different, since with a high load on the blockchain network, the level of your commission may be high, so you should always pay attention to this.

Great examples of DEX are:  Biswap, PancakeSwap


DEX exchanges have inherent characteristics such as:

  • Lack of servers for storing private keys of users, you are obliged to control logins, passwords and funds on your own.
  • Complete anonymity. DEX does not require verification of your personal data.
  • DEX interface is too limited and looks more complicated for beginners.
  • Fiat currencies are not available on DEX. To withdraw funds, users need to contact either exchangers or, again, CEX services.
  • DEX connects market participants directly, without using buy and sell orders.
  • limited functionality, impossibility of setting Stop-Loss and lack of margin trading.
  • Blockchain technology limits the number of transactions per second.


The main function of the DEX exchange is exchange

The main function of a CEX exchange is trading

There is an opinion that the confrontation between CEX and DEX is like a fight without a winner. On the one hand, decentralized exchanges are safer and more reliable than traditional ones, while centralized exchanges are more suitable for trading and making money.

Now new trends are moving towards the regulation of the crypto industry.

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