Centralized exchanges (CEXs) and Decentralized exchanges (DEXs) are two types of platforms that facilitate the buying and selling of cryptocurrencies. However, they differ significantly in their architecture, governance, and level of decentralization.
They are operated by a centralized authority, such as a company or organization. They act as intermediaries between buyers and sellers, holding custody of users’ funds and controlling the matching engine and order book. CEXs are typically easier to use, offer higher liquidity, and provide more trading pairs than DEXs. However, they also pose significant risks, including security breaches, regulatory compliance, and user data privacy, n the other hand,
are built on blockchain technology, and there is no centralized authority controlling the platform. Instead, trades are conducted directly between buyers and sellers through smart contracts, and users hold custody of their own funds. DEXs are generally more secure, private, and censorship-resistant than CEXs, but they also have lower liquidity and a limited range of trading pairs. Moreover, the user experience can be more complex and less intuitive than that of centralized exchanges.
Both types of exchanges have their advantages and drawbacks, and the choice between them depends on the user’s preferences and risk tolerance.