#CEXvsDEX101 Centralized vs. Decentralized Exchanges
Centralized exchanges (CEXs) like Binance or Coinbase are run by a single company that controls everything—your funds, trades, and data. Decentralized exchanges (DEXs) like Uniswap or PancakeSwap operate on blockchain tech, meaning no one entity is in charge, and trades happen directly between users via smart contracts. CEXs are user-friendly, fast, and great for beginners but come with risks like hacks or losing control of your funds. DEXs give you more control and privacy but can be clunky, expensive (gas fees!), and less beginner-friendly. I lean toward DEXs for privacy and control, especially for long-term crypto holders, but CEXs are better for quick trades or newbies.
Differences Between Centralized and Decentralized Exchanges
• Centralized Exchanges (CEXs): These are platforms like Binance, Coinbase, or Kraken, where a company manages the exchange. You deposit funds, they hold them, and you trade through their system. They act as a middleman, handling order books, matching buyers/sellers, and storing your assets.
• Decentralized Exchanges (DEXs): These run on blockchains (e.g., Ethereum, Binance Smart Chain) using smart contracts. No middleman—users trade directly from their wallets (like MetaMask) via protocols like Uniswap or SushiSwap. The blockchain handles the trade logic.
Pros and Cons
Centralized Exchanges (CEXs)
Pros:
• Easy to Use: Clean interfaces, simple navigation, and often mobile apps. Great for beginners.
• Fast and Cheap: High trading speed and low fees (e.g., 0.1% per trade on Binance). They handle transactions off-chain, so no gas fees.
• Lots of Features: Fiat on-ramps (buy crypto with USD/EUR), margin trading, staking, and customer support.
• Liquidity: CEXs often have deeper order books, making it easier to buy/sell large amounts without price slippage.
Cons:
• Custodial Risk: You don’t own your private keys. If the exchange gets hacked (e.g., Mt. Gox in 2014) or goes bankrupt (e.g., FTX in 2022), you could lose everything.
