In the world of cryptocurrency, there are two main types of exchanges: centralized exchanges (CEX) and decentralized exchanges (DEX). While both serve the purpose of allowing users to trade cryptocurrencies, there are some significant differences between the two that are important to understand.
Centralized exchanges are operated by a single company or organization, and they typically hold custody of the funds being traded on their platform. This means that users must trust the exchange to keep their funds safe and secure, and there is a risk of the exchange being hacked or going bankrupt.
Decentralized exchanges operate on a peer-to-peer network and do not rely on a central authority to hold funds or execute trades. Instead, they use smart contracts to automate the process of buying and selling cryptocurrencies. This means that users retain control of their funds at all times, and there is no risk of the exchange being hacked or going bankrupt.
So why is it important to know the difference between a CEX and a DEX? First and foremost, it comes down to security. If you are someone who values having full control over your cryptocurrency holdings and minimizing the risk of theft or loss, then a DEX may be the better option for you.
Additionally, decentralized exchanges offer more privacy and anonymity compared to centralized exchanges, which may be important for some users. However, it's worth noting that DEXs can be less user-friendly and have lower trading volumes compared to centralized exchanges.
Centralized Exchanges vs Decentralized Exchanges explained in this video
Centralized Exchange
A centralized exchange is an intermediary organization that facilitates crypto trading between buyers and sellers. They are a third-party entity that provides services and oversees operation activities to allow traders to buy, sell, or exchange crypto tokens. These type of exchanges have a middleman to service you. Remember, middleman can always compromise your funds. If you use them, we recommend always remove your funds to your own wallet after you made your transactions. For bigger transactions, split into smaler ones. Never use centralized exchanges as a vault to keep your funds.
CEX - Centralized ExchangeDecentralized Exchanges
Spaces can be published to the whole world, or just some of it, or just to a few very specific people. You can also invite folks to collaborate with you on a space if you're on a community, team, or business plan. These type of exchanges do not have middleman. We prefer to work with decenralized exchanges whenever you can. Make sure, you learn how to use them for your benefit.
DEX - Decentralized ExchangeComparing CEX and DEX
