#CEXvsDEX101 CEX: You face counterparty risk. Your funds are held by the exchange. If the exchange gets hacked, goes bankrupt, or acts maliciously (exit scam), you could lose your assets. However, they handle security complexities and often have insurance funds.

DEX: You face **self-custody risk & smart contract risk. You are solely responsible for securing your wallet keys. If you lose them, funds are gone forever. Additionally, the DEX's underlying smart contracts could have vulnerabilities exploited by hackers.