Centralized Exchange (CEX) vs. Decentralized Exchange (DEX): What’s the Difference?
Decentralized exchanges are growing in popularity as a non-custodial way to trade assets without the need for a middleman. If you are considering buying or selling crypto, your first port of call will probably be an exchange. These are the digital marketplaces where most crypto trading takes place. You have probably heard of a few: Binance, Kraken, Uniswap and so on. Most are centralized and use a business model similar to traditional institutions like the New York Stock Exchange. But a growing number are decentralized and radically rethinking how exchanges can work. Here, we explain the pros and cons of each type. Decentralized exchanges (DEXs) have been emerging over the last five years to challenge incumbent centralized exchanges (CEXs). In brief, DEXs aim to offer lower transaction fees, let users directly hold their own assets and avoid some regulatory burdens. On the other hand, they face the cost of compensating their liquidity providers for a special kind of risk called “i...