When you enter the world of cryptocurrencies, one of the first points of contact is the exchange. But not all exchanges are the same — they are divided into two fundamentally different types: CEX (centralized) and DEX (decentralized). Let's figure out how they work, what their strengths and weaknesses are, and which option suits your needs.
How it works
1. Centralized Exchange (CEX)
Who manages it: an operating company (e.g., Binance, Coinbase, Kraken)
How it works: you transfer your coins to the exchange address, receive internal balances and trading pairs on your account. All orders are processed in an internal engine, and clearing and settlements are centralized.
Typical functions: margin trading, futures, staking, lending, fiat deposits/withdrawals.
2. Decentralized Exchange (DEX)
Who manages it: smart contracts on the blockchain (e.g., Uniswap, SushiSwap, PancakeSwap)
How it works: you connect your wallet (MetaMask, Trust Wallet) — and trade directly, the exchange occurs 'peer-to-peer' through a liquidity pool. Your assets do not leave your wallet until the moment of the transaction.
Typical functions: token swaps, liquidity pool, farming, sometimes — limit orders through aggregator protocols.
Advantages and risks
CEX — centralized exchanges
High speed and liquidity. Large trading volumes and deep order books ensure instant market execution and tight spreads.
A variety of tools. From derivatives to margin and VIP services — all in one window.
Support for fiat. The ability to buy crypto with dollars, euros, rubles, or local currency.
Risk management. There is customer support, insurance funds, compensation programs.
But…
You do not own the keys. The exchange holds your private keys, and you rely on its security.
Legal risks. The exchange can be hacked, funds can be seized due to sanctions, or accounts can be frozen due to suspected violations.
KYC/AML. You will have to go through verification and disclose personal data.
DEX — decentralized exchanges
Control over assets. Your coins are stored in your wallet until the transaction.
Anonymity and freedom. No need to verify — you can enter with any wallet.
Access to all tokens. You can trade any tokens that are in the liquidity pool or even create your own pairs.
But…
Lower liquidity. Pools are limited by the funds of liquidity providers, which can lead to high slippage.
Risk of smart contracts. A bug in the code or a vulnerability can lead to loss of funds.
Complexity of the interface. For beginners, this often turns out to be more difficult than the familiar CEX web panel.
When and what to choose
If you are a beginner and value simplicity, quick fiat deposits/withdrawals, and customer support — CEX will suit you better.
If you are an experienced user and want full control over your keys, anonymity, and access to a wide range of tokens — choose DEX.
Hybrid approach:
1. Store long-term assets in non-custodial wallets or cold wallets.
2. For active trading, use CEX.
3. For Yield Farming, swaps, and working with new tokens, visit trusted DEX protocols.
