#CEXvsDEX101
"CEX" and "DEX" are acronyms commonly used in the cryptocurrency and blockchain space. Here's what they mean and how they differ:
CEX – Centralized Exchange
Examples: Binance, Coinbase, Kraken
Definition:
A centralized exchange is a crypto trading platform operated by a centralized company or entity that acts as a middleman to facilitate trades between users.
Key Characteristics:
Custodial: The platform holds your funds in its wallets.
User-friendly: Easier onboarding and trading experience.
High liquidity: Often better for large trades or fast execution.
KYC/AML: Typically requires identity verification (Know Your Customer).
Customer support: Offers direct support and dispute resolution.
Pros:
Easier for beginners.
Faster trades and more features.
Often higher trading volume.
Cons:
Security risks (hacks, exit scams).
Less privacy.
You don’t control your private keys ("not your keys, not your coins").
DEX – Decentralized Exchange
Examples: Uniswap, PancakeSwap, dYdX
Definition:
A decentralized exchange is a platform that enables peer-to-peer crypto trading without intermediaries, usually using smart contracts on a blockchain.
Key Characteristics:
Non-custodial: Users keep control of their funds.
On-chain: Transactions happen directly on the blockchain.
Privacy-focused: Usually no KYC requirements.
Permissionless: Anyone can use it without approval.
Pros:
Greater privacy and control.
Lower risk of hacks involving exchange wallets.
Open and censorship-resistant.
Cons:
Steeper learning curve.
Slower and more expensive transactions (depends on the blockchain).
Lower liquidity on smaller tokens.
Summary Comparison
Feature CEX DEX
Custody Centralized (custodial) Decentralized (non-custodial)
User Control Exchange holds funds User holds funds
KYC/AML Required Usually not required
Liquidity High Varies
Speed Fast Can be slower
Security Trusted third party Trustless, but requires good OPSEC
Ease of Use High Moderate to low
