DEX VS CEX: What are the differences?

If we want to talk about DEX and CEX and their differences, we must first consider why they exist in the first place. Usually, buyers and sellers get along with supply and demand and a win-win situation. There is no doubt that crypto markets are accessible to everyone, thanks to decentralized and centralized exchanges. CEX was the first option for anyone who wanted to join the crypto ecosystem, although both exchanges worked in parallel for a long time. Right now we have both DEX and CEX with their differences and disadvantages/advantages for different emerging situations. So how should we explain both DEX and CEX?

What are the sufficient differences between DEX and CEX?

DEX and CEX offer a similar concept, but the approach is very different. For example, CEX has stricter guidelines for getting started. Policies such as KYC (Know Your Customer) and AML (Anti-Money Laundering) require authentication procedures. There is also a strict security check, and all data is shared through centralized security procedures. Nonetheless, DEX is more accessible as customers do not have to register and go through KYC and AML procedures. It allows peer-to-peer transactions without the involvement of a third party. Also, decentralized exchanges will enable you to maintain complete control over your account yourself, whereas centralized exchanges do not allow the intermediary to control your account. In general, CEX is very convenient for beginners due to its fast and easily understood user interface.

What are the advantages and disadvantages of CEX and DEX?

The most crucial advantage of a decentralized exchange is complete anonymity. Users do not have to sign up and verify themselves, so there are no KYC and AML policies. They are also not monitored by the authorities, which further protects trading. One of the most important advantages is that DEX will not directly attack the blockchain.

Speaking of disadvantages: The decentralized exchange has some significant functionality issues. As we mentioned earlier, the centralized exchange is very convenient for beginners due to its intuitive user interface. The decentralized exchange has inadequate functionality. We also have to note that it charges high fees for transactions and that transactions can be slow.

The centralized exchange has its significant advantages. Let us assume we skip the part about great functionality. In this case, it is worth noting that centralized exchanges allow the use of a wide range of cryptocurrencies and allow deposits and withdrawals even in fiat currencies. The centralized exchange has its significant advantages. They allow for fast transactions, a real-time market situation, and the execution of many orders within a few seconds.

The disadvantages include the risk of total loss. The involvement of a third party does not guarantee security for the assets. Users’ wallets are under the control of the system. In the past, there have been significant losses.

Let us compare DEX and CEX.

A centralized exchange and a decentralized exchange have their similarities and differences. A centralized exchange is more suitable for beginners due to its easy-to-understand interface and quick transactions. A decentralized exchange is aimed at more experienced users who want absolute privacy and control over assets without a third party involved.

The graph shows the trading volume on decentralized exchanges such as Uniswap, Curve, Serum DEX, etc.

Here we can see the comparison between decentralized exchange and centralized exchange. As we know that regulatory risks are getting bigger, more and more traders want to move to DeFi – decentralized exchanges.

Since September 24, the Chinese government has restricted any crypto transactions within the country.

Centralized exchanges are being restricted, which is a massive opportunity for the entire DeFi ecosystem. Traders want more privacy in their transactions, and – as we can see from China’s example – traders are looking for more compelling ways to transact.

Decentralized exchanges allow traders to obtain loans, credits, and other financial opportunities, eliminating the need for brokers or banks to step in between. Moreover, users can start trading within minutes as there are no KYC guidelines to follow. All users need is access to their crypto wallets.

Tel Aviv, October 13, 2021.