#CEXvsDEX101 Differences Between Centralized (CEX) and Decentralized Exchanges (DEX)

Centralized Exchanges (CEX):

Operated by a central authority (e.g., Binance, Coinbase)

Users deposit funds into the exchange’s custody

Faster transactions and higher liquidity

Easier for beginners with user-friendly interfaces

Require KYC (Know Your Customer) compliance

Pros:

High liquidity and fast order execution

Customer support and insurance options

Advanced trading tools

Cons:

Prone to hacks or regulatory shutdowns

Custodial (users don’t control private keys)

Requires trust in a third party

Decentralized Exchanges (DEX):

Peer-to-peer trading using smart contracts (e.g., Uniswap, PancakeSwap)

Users retain control of their private keys

No central authority—more resistant to censorship

Pros:

Greater privacy and anonymity

Self-custody of assets

Lower risk of centralized failure

Cons:

Lower liquidity and slower transactions

Complex UI/UX for beginners

Limited support and fewer trading pairs

When to Use Each:

Use CEX for speed, convenience, and access to fiat on/off ramps

Use DEX when prioritizing privacy, self-custody, and decentralization