#CEXvsDEX101
The centralized exchange (CEX) is operated by a single entity or group, such as a private company or a public company. The controlling entity is responsible for all aspects of the platform's operations. Decentralized exchanges (DEX) are operated by a technical protocol that enables a large number of people to participate in peer-to-peer cryptocurrency trading.
What is a Centralized Cryptocurrency Exchange (CEX)?
It is operated by a company or a group of individuals. This exchange acts as a third party between buyers and sellers of cryptocurrencies. It also serves as an intermediary and custodian for participants in the cryptocurrency market. Some of the most famous exchanges are: Binance, Kraken, and Coinbase.
Similar to traditional exchanges, centralized securities exchanges are usually subject to regulation by relevant government authorities.
Because of this, when users want to open an account with a CEX, they need to undergo a series of cumbersome KYC (Know Your Customer) and AML (Anti-Money Laundering) verification procedures.
What is a Decentralized Cryptocurrency Exchange (DEX)?
Decentralized exchanges are decentralized finance (DeFi) applications. They are built on blockchains that support smart contracts.
Decentralized exchanges (DEX) allow cryptocurrency traders to exchange currencies and tokens without an intermediary. This makes transactions faster and cheaper. Decentralized exchanges achieve this by bypassing intermediaries, who typically take a portion of the fees.