Exchanges

There are two types of exchanges to trade crypto at: Centralized Exchanges (CEX) and Decentralized Exchanges (DEX).

CEX

Centralized exchanges are owned by companies. Traders looking to use their platform have to send their crypto to an exchange-owned wallet first. This means that your crypto is at risk in case the exchange gets hacked which has happened on numerous occasions. Certain exchanges are somewhat protected against outside attacks due to insurance or their own safety buffer.

Most centralized exchanges force you to perform some form of KYC in order to comply with regulation. For some, this could be a negative as they value the anonymity of crypto.

Centralized exchanges usually have better liquidity, a more user-friendly platform and a better offer of order types. This makes it a better choice for users that trade more frequently or want to use different order types.

A couple of popular ones are Binance, BitFinex, and Coinbase.

DEX

Decentralized exchanges are not company-owned. Traders using these exchanges can stay anonymous as they do not have to perform any KYC. These exchanges are non-custodial so trading happens from the traders’ wallets. Trades are directly settled on the blockchain, so traders will have to pay gas fees on top of the commission. Traders remain responsible for their own funds.

Decentralized exchanges often have less liquidity than Centralized Exchanges, leading to higher volatility and risk. This could also result in higher slippage when executing orders.