The core differences between centralized exchanges (CEX) and decentralized exchanges (DEX) essentially stem from divergent architectural design philosophies. CEX relies on institutional credit endorsements for efficient matching, with user assets held on the platform and orders processed by central servers, allowing mainstream cryptocurrency trading slippage to be compressed to below 0.05% (as seen in Binance's BTC/USDT trading pair), and supports fiat channels and complex derivatives. However, this model requires mandatory KYC and carries the risk of exchange hacks or regulatory freezes (such as the 2022 FTX incident). In contrast, DEX executes trades automatically via smart contracts, where users always hold private keys, and assets do not need to be held in transit, allowing for the instant creation of any token trading pair under a permissionless mechanism, making it particularly suitable for early project cold starts. However, the AMM liquidity pool model results in significant slippage for large trades (Uniswap often sees slippage over 2% for $100,000 ETH exchanges), and on-chain settlement is constrained by the performance of the underlying public chain—Ethereum gas fees can account for 5% of transaction amounts during congestion, while high-performance chains like Solana face stability controversies.

The current market presents a fragmented landscape dominated by CEX liquidity while DEX drives innovation. TokenInsight's Q1 2024 data shows that CEX captures 76% of the entire network's spot trading volume, with Binance alone accounting for 58.3%, offering zero slippage execution for institutional large trades; DEX, on the other hand, holds a significant advantage in long-tail assets, with over 1,200 new tokens launched on DEX each month, while on-chain derivatives are experiencing remarkable growth (dYdX has a 24H trading volume of $1.9 billion). The regulatory landscape has accelerated technological integration: CEX is integrating DEX aggregators (such as Binance's Web3 wallet directly connecting to PancakeSwap), while DEX is adopting a hybrid model of off-chain order books + on-chain settlement (like dYdX v4) to enhance user experience. Actual choices must anchor to demand—fiat deposit and withdrawal, high-frequency strategies, and orders exceeding one million dollars must rely on the CEX risk control system; combating censorship, participating in DeFi mining, or trading non-standard tokens will incur the gas costs and impermanent loss risks associated with DEX. The liquidity fragmentation will persist, but advancements in cross-chain settlement layers may reshape competitive boundaries.