CEX vs. DEX: What’s the difference?
Wombat Exchange is a decentralized stableswap built on the BNB Chain. One of the most commonly asked questions is, “Why should I swap on Wombat instead of a centralized exchange like Binance?” To answer this, we must understand the fundamental difference between decentralized exchanges, like Wombat, and centralized exchanges.
The difference between CEXs and DEXs
Exchanges like Binance, Coinbase, and FTX, are Centralized Exchanges (CEX) and are controlled by people to manage funds and conduct various financial operations, while Decentralized Exchanges (DEX) like Uniswap, PancakeSwap, and Curve, use technology and automation via smart contracts to perform the services being offered. Both serve as an exchange but for completely different purposes and target users — CEXs are usually for first-time users, while DEXs target more knowledgeable users.
Benefits of DeFi
1. 24/7 Accessible
One of the most significant benefits of DeFi is that it can be accessed at any time and anywhere as long as you have a stable internet connection. It works 24/7 so users don’t need to wait for approval to access a wide variety of financial services directly. In CEXs, scheduled maintenance is often required, so some services may be prohibited from time to time.
2. Permissionless/ No KYC is required
For most of the CEXs, you have to be compliant with Know Your Customer (KYC) requirements meaning you are required to provide personal data in order to access their services, which leads to privacy and hacking concerns. The majority of the DeFi protocols, including Wombat, allow users to use their services with just a wallet connection. All transactions can be reviewed using external tools such as Etherscan for transparency.
3. 100% Control
CeFi protocols are easy to use, but funds in the exchange are under the custody of the exchanges. In DeFi, users have 100% control over their assets. Your funds are kept in your own personal wallet. No one can use your asset without permission.
Wombat vs CEXs
DeFi offers more freedom and potentially better payoffs and opportunities for users as it mitigates trading fees from constitutions & organizations — although it may require more knowledge to use. Transferring back to a CEX for a token swap while using a DeFi ecosystem is time-consuming and costly — that’s when DEXs like Wombat comes in handy.
To sum up, while we cannot directly compare Wombat with centralized exchanges as they serve different purposes to different users, we still strive to solve problems in existing stableswaps and bring everyone an innovative experience while benefiting the DeFi ecosystem as a whole.
About Wombat Exchange
Wombat Exchange is a multichain stableswap native on the BNB Chain, focused on re-engineering the stableswap experience with its innovative algorithm design. Wombat’s vision is to fuel DeFi growth and push boundaries with greater capital efficiency, increased accessibility, and scalability, with the adoption in a multichain world. To learn more, visit wombat.exchange, or follow us on the social channels below:
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