#CEXvsDEX101
CEX vs. DEX 101: Centralized vs. Decentralized Exchanges Explained**
Cryptocurrency exchanges are platforms where users can buy, sell, and trade digital assets. They fall into two main categories: **Centralized Exchanges (CEX)** and **Decentralized Exchanges (DEX)**. Here’s a breakdown of their key differences:
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## **1. Centralized Exchanges (CEX)**
**Examples:** Binance, Coinbase, Kraken
### **How They Work:**
- Operated by a company that controls users’ funds and order books.
- Users deposit funds into the exchange’s wallets, trusting the platform to manage trades.
- Trades are matched internally (off-chain) before being settled on the blockchain.
### **Pros:**
✅ **High liquidity** – Large user base ensures easy trading.
✅ **User-friendly** – Simple interfaces, customer support.
✅ **Fast transactions** – Trades happen instantly (no on-chain delays).
✅ **Fiat on/off ramps** – Easy to buy crypto with credit/debit cards or bank transfers.
### **Cons:**
❌ **Custodial risk** – You don’t control your private keys (exchange can freeze funds).
❌ **Hacking risks** – Big targets for cyberattacks (e.g., Mt. Gox, FTX collapse).
❌ **KYC/AML requirements** – Identity verification needed.
❌ **Censorship** – Governments can block access.
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## **2. Decentralized Exchanges (DEX)**
**Examples:** Uniswap, PancakeSwap, dYdX
### **How They Work:**
- Runs on **smart contracts** (no middleman).
- Users trade directly from their wallets (non-custodial).
- Trades happen **on-chain** (recorded on the blockchain).
- Uses **Automated Market Makers (AMMs)** or order books.
### **Pros:**
✅ **Non-custodial** – You control your funds (private keys).
✅ **No KYC** – Trade anonymously (in most cases).
✅ **Censorship-resistant** – No central authority can shut it down.
✅ **Permissionless** – Anyone can list tokens without approval.
