#CEXvsDEX101

Centralized exchanges (CEX) and decentralized exchanges (DEX) represent opposing models with clear trade-offs. CEXs like Binance offer deep liquidity (0.1-0.3% spreads on majors) through traditional order books, facilitating institutional and OTC execution, but introduce counterparty risk and regulatory vulnerability. DEXs like Uniswap operate through AMMs and smart contracts, allowing non-custodial trading and composability with DeFi, although they face challenges like fragmented liquidity across chains, impermanent loss, and MEV extraction.

While CEXs dominate spot volume (75% according to CoinGecko), DEXs innovate with L2 solutions (EIP-4844) to reduce gas fees. The optimal decision depends on the profile: institutional traders prioritize CEX for large blocks, while builders prefer DEX for censorship resistance. The future points to hybrids (CEX with on-chain settlement) that combine the best of both worlds, maintaining compliance without sacrificing self-custody. The key is to understand the underlying mechanisms of price discovery in each model.