#CEXvsDEX101

CEX vs. DEX 101: Centralized vs. Decentralized Exchanges

The main difference between a CEX (Centralized Exchange) and a DEX (Decentralized Exchange) boils down to who controls your funds and how trades are facilitated.

1. CEX (Centralized Exchange)

Definition: Operated by a single company or organization. They act as an intermediary, holding your crypto for you (custodial) and matching buyers and sellers internally.

Examples: Binance, Coinbase, Kraken, Bybit.

Pros:

User-Friendly: Intuitive interfaces, ideal for beginners. High Liquidity: Large trading volumes, meaning you can buy and sell quickly with little price impact (slippage). Fiat On-Ramps: You can deposit and withdraw traditional money (GTQ, USD, EUR) directly from/to your bank account. Additional Features: They offer staking, loans, futures trading, customer support, etc. Transaction Speed: Internal transactions are instant.

Cons:

Custodial Risk: "Not your keys, not your coins." The CEX has your funds. If the platform is hacked or goes bankrupt (like FTX), you can lose your assets. KYC/AML Requirements: You must verify your identity (Know Your Customer / Anti-Money Laundering), which reduces privacy. Centralization: The spirit of crypto is decentralization. CEXs go against this, with central control and potential censorship or freezing of funds. Less Privacy: Your activity is linked to your identity. Vulnerability to Hacks: Being a centralized point, they are an attractive target for hackers. 2. DEX (Decentralized Exchange)

Definition: Operate directly on a blockchain through smart contracts. They allow peer-to-peer (P2P) trading directly from your wallet, without an intermediary holding your funds.