#CEXvsDEX101
In the world of cryptocurrencies, there are two main types of exchange platforms:
CEX (Centralized Exchange): They operate similarly to banks or traditional trading platforms. They are run by a central company that acts as an intermediary. To use them, users must register and go through identity verification processes (KYC/AML). The company holds users' funds and matches buyers and sellers through an order book.
Advantages: Ease of use, intuitive interfaces, higher liquidity, support for fiat money, and they often offer more features (such as margin trading, staking).
Disadvantages: Users do not have full control over their private keys (risk of hacks on the platform), are subject to government regulations, and censorship.
DEX (Decentralized Exchange): These are platforms that allow the exchange of cryptocurrencies directly between users, without a central intermediary. They operate through smart contracts on the blockchain. Users maintain control of their funds in their own wallets.
Advantages: Greater privacy (do not require identity verification), resistance to censorship, users have full control of their private keys (self-custody), and lower fees in some cases.
Disadvantages: They tend to have more complex interfaces, lower liquidity, potentially slower transactions, and a more limited variety of cryptocurrencies. They usually do not support direct purchases with fiat money.
In summary, CEXs offer ease of use and higher liquidity in exchange for relinquishing custody of funds and being subject to regulation. DEXs, on the other hand, prioritize decentralization, privacy, and self-custody, but can be more complex to use and have lower liquidity. The choice between one or the other depends on the user's priorities regarding security, privacy, ease of use, and features.
