The Difference Between Centralized and Decentralized Crypto Exchanges

Dex vs CEX explained | What difference between Decentralized exchange vs Centralized Exchanges in Cryptocurrency and Bitcoin Terminology.

Written by Niel Patel · 2 min read >
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The cryptocurrency industry is evolving, and together with its development, more and more people strive to join it and buy crypto. Even not crypto-savvy people unaware of trading buy digital coins to hold them long-term as an investment. 

Trading cryptocurrency is a much more challenging way of making a profit from crypto assets compared with long-term investment. Trading implies constantly tracking the market, reacting to its volatility, and forecasting future trends. It requires in-depth knowledge of the market and using advanced tools for trading, which are provided by large crypto exchanges. There are two main types of such services proposed on the Internet:

  • CEX – centralized exchanges
  • DEX – decentralized platforms. 

CEX versus DEX

Centralized cryptocurrency exchanges are online platforms used to trade cryptocurrencies like coin base, finance, Gemini. Since they are completely centralized, they act as a custodian over your funds and control your private keys.

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Here are some of the main features of centralized cryptocurrency exchanges.

  1. Third-party operating the exchange.
  2. Customers do not have access to their private keys.
  3. Fiat trading pairs are typically available.
  4. Know your customer.
  5. Anti-money laundering AML systems usually in play.
  6. Market makers and takers on the exchange and an integral factor of trading.

Those are the main features that you will see on all centralized cryptocurrency exchanges.

CEX, the most important features, of course, are that a third party operates the exchange and customers do not have access to their private key.

What is DEX?

They use decentralized exchanges when traders need to proceed with fast transactions with smaller amounts. DEX does not ensure user funds’ safety; it does not ask for verification and does not owe to protect users’ funds. Transactions are conducted from users’ wallets and do not remain on DEX. Unlike CEX, where funds are stored on CEX servers.  DEX provides a smaller amount of crypto assets for trade in crypto and a smaller range of tools.

DEX is a cryptocurrency exchange that operates at a decentralized manner without any form of Central Authority. Dex do not require a third party to store your funds and enable you to retain control over your private key at all times.

Some examples of DEX are unusual, pancake swap, and sushi swap. Anyway, here are some of the main features of a deck. Decentralized, no party controls the exchange. Users can list any coin they want. Users have access to their private key market. Market takers, but not market makers. Stinking is typically available. The price is set strictly by supply, demand and liquidity. Fiat is not accepted. No KYC or AML measures in place.

Let’s see the difference.

What Should You Know about CEX?

CEX are crypto exchanges operating officially and following all the requirements in this field. These are registered companies that work similarly to bank systems having a staff of managers who provide the efficient functioning of platforms. Examples: WhiteBIT, Binance, Coinbase. Since CEX are officially companies, they must ensure clients’ funds’ safety. For that purpose, they require every client to register and pass KYC. That is a thorough check of a client’s data on the subject of any illegal activities in the past. Usually, it takes just a few days, and once the KYC verification is finished, a user accesses all the trading tools and earning options on an exchange. CEX keeps track of transactions carried out on it and clocks every suspicious activity or when some substantial amounts are moving. It helps to ensure users’ safety and reliability of an exchange.

CEX allows registered users to buy digital assets with their bank cards. CEX offer a wide selection of crypto assets and trading tools.

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