Difference between Centralized Exchange (CEX) and Decentralized Exchange (DEX)

In this short and simple article, we will go over the main differences and similarities between centralised exchanges (CEXs) and decentralised exchanges (DEXs).

Centralized Exchange (CEX)

Exchanges for centralised cryptocurrencies provide online platforms that are used to trade cryptocurrencies. Due to the fact that they are fully centralised, they serve as a custodian over your money and have complete authority over your personal information.

CEXs have long been the preferred venue for conventional investors since these exchanges provide a comparable experience to that of traditional brokerage companies and stock exchanges. However, this has changed recently. Additionally, centralised exchanges have given essential trading capabilities, such as the ability to trade on leverage and the ability to establish short positions. Similarly, traders who are new to cryptocurrency have often chosen to utilise CEXs, placing their confidence in the intermediary to keep their money.

CEXs often offer better user interface and user experience (UI/UX) compared to its DEX equivalents, resulting in a considerably more intuitive trading environment for both retail and institutional traders. CEXs, on the other hand, are seen to be lacking in many ways by people who genuinely believe in the benefits of decentralisation.

Over the last 10 years, hackers have stolen cryptocurrency worth more than $1 billion from cryptocurrency exchanges. Although cryptocurrency exchanges (CEXs) like as Binance have been able to repay traders from their own reserves on occasion, customers’ credentials have nevertheless been compromised. Furthermore, as a result of government investigations and actions, CEX users have had their assets frozen in a number of circumstances. Furthermore, CEXs often have stringent Know Your Customer/Anti-Money Laundering (KYC/AML) rules that prohibit customers from specific areas and countries from obtaining access to the trading platform.

Examples of CEXs.

We’ll give you a quick summary of the CEX ecosystem right now.

Binance

With both simple and sophisticated trading settings, Binance is a controlled exchange that aims to serve investors of all skill levels and experiences. Traders may earn money by participating in trading contests on Binance, while also contributing to the creation of token liquidity.

Coinbase

Coinbase is a cryptocurrency exchange that is one of the most well-known in the market. They are popular for a variety of reasons, one of which is that they make it easy for first-time users to buy Bitcoin using PayPal, debit/credit cards, and bank transfers. As of right now, the platform supports a number of important cryptocurrencies, including Bitcoin and Ethereum, among others.

Gemini

Founded in 2015 by Cameron and Tyler Winklevoss as a worldwide digital asset exchange and regulated New York trust business, Gemini has grown to become one of the world’s largest. It is possible to trade cryptocurrency to cryptocurrency and fiat to cryptocurrency pairings on the exchange. Since its establishment, the exchange has launched additional cryptocurrency products in an effort to make cryptocurrency more accessible to more people.

Decentralized Exchanges (also known as decentralised markets) are markets that are not centralised (DEXs)

A decentralised exchange (DEX) is a cryptocurrency exchange that works in a decentralised way, meaning that there is no central authority in charge of the exchange. Decentralized exchanges do not need you to entrust your money to a third party and let you to maintain complete control over your private keys at all times.

Examples of DEXs

In this section, we give a great overview of the DEX ecosystem.

Uniswap

Uniswap is an Ethereum-based system that allows users to swap ERC20 tokens without the requirement for buyers and sellers to generate demand. It is still under development. It does this via the use of an Automated Market Making (AMM) model, which establishes an equation that automatically sets and balances the value based on the amount of demand present in the marketplace.

Babyswap

BabySwap is the best AMM+NFT decentralised exchange for newborn projects on the Binance Smart Chain, offering a more pleasant trading experience as well as superior project assistance than any other exchange. Baby is the Wave of the Future!

Conclusion

As this tutorial has shown, both CEXs and DEXs have advantages and disadvantages.

With the help of the Injective community, we’ve been able to create a platform that combines the greatest aspects of both the CEX and DEX ecosystems. Traders on Injective will now be able to benefit from security, anonymity, liquidity, and a better user experience all inside a single exchange.

For Chinese Version, Centralized Exchange (CEX) and Decentralized Exchange (DEX) : 什么是CEX和DEX?