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CEX vs. DEX: Key Differences in Crypto Trading Explained

In the cryptocurrency ecosystem, two main types of platforms allow users to trade and manage digital assets: Centralized Exchanges (CEXs) and Decentralized Exchanges (DEXs). While both serve the same core function—facilitating crypto transactions—they differ significantly in how they operate, affecting everything from security and control to privacy and accessibility.

What is a Centralized Exchange (CEX)?

A centralized exchange functions similarly to a traditional stock exchange. It acts as an intermediary between buyers and sellers and holds users’ funds in custody. This means the exchange, not the user, controls the private keys. Well-known CEXs include Binance, Coinbase, and Kraken.

Advantages of CEXs:

User-Friendly Interface: Ideal for beginners, with easy navigation and responsive customer support.

High Liquidity: Greater trading volumes often lead to faster transactions and better pricing.

Fiat Support: Easily convert traditional currencies (like USD or EUR) into crypto and vice versa.

Advanced Features: Offer tools such as margin trading, futures, and diverse order types.

Robust Security: Employ measures like 2FA, cold wallets, and insurance funds to enhance protection.

Drawbacks of CEXs:

Custodial Risk: You don’t own your private keys, making funds vulnerable if the exchange is compromised.

Mandatory KYC/AML: Require personal identity verification, which may raise privacy concerns.

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