Exchanges are the most popular place to trade cryptocurrencies. Binance is a major centralized exchange, (CEX) that handles more than $24.27 million in daily volume. Similarly, UniSwap is the world’s largest decentralized exchange (DEX) with over $7.25 billion in Total Value Locked (TVL).
Decentralized exchanges have a strong presence in the marketplace, but they also hold market supremacy. While both DEXs and CEXs allow crypto-transactions to be conducted, the two exchanges have significant differences in security, cost and transparency. As we’ll see in this article, each CEX and DEX has its own unique set of benefits that makes them different.
Centralized exchanges
While CEXs can be seen as a violation of the spirit and intent behind blockchain technology, there are a few key advantages to them, like the ones below:
Liquidity
Centralized exchanges maintain enough funds to permit quick deposits or withdrawals. Anybody can instantly exchange BTC to USD on the CEX. Liquidity is in fact a CEX’s trump card, which is why they invest a lot into supplying consumers with high-speed transactions with minimal slippage.
Blockfinex offers an exchange for crypto assets that is highly secure, robust, and has deep liquidity.
Regulating
CEXs often seek permissions to operate in more than one country, which demonstrates their competence and stability before financial regulators. The CEXs also implement investor protection and send clients risk alerts about the irreversible nature transactions. It builds trust and confidence among users, which allows them to use it with confidence.
Easy-to-Use
Most CEXs offer intuitive interfaces that make trading crypto easy. Users can also set up trades within seconds, as orders and custody data are all centralized. This makes them the best place to make large trades.
One such cryptocurrency exchange is Blockfinex. It offers a simple interface to trade crypto. With just a few clicks, traders can buy/sell large volumes of crypto without any slippage.
Decentralized exchanges
Operating DEXs is the same as turning on advanced settings for an app. These dexs are open-source and trustless. They also provide full transparency to their users.
These benefits include:
Privacy
When onboarding, DEXs don’t usually request sensitive information. In other words, DEXs do not implement procedures like KYC (Know-Your-Customer). All transactions, from wallets to transactions are anonymous which guarantees the highest privacy.
Assets in Self-Custody
The rule of thumb in DeFi is this—Not your keys and not your crypto. DEXs are not custodial and adhere to the same principle. This allows users to exercise their self-custody. DEX users are able to retain complete control over their keys and thus have genuine ownership of all their assets.
Lower transaction fees
The use of decentralized exchanges reduces the need to involve middlemen and results in lower transaction costs overall. Most DEXs run on Ethereum, which can lead to expensive gas prices at times.
Blockchains, however, are quickly innovating to reduce fees for users. On Polygon Network, transactions worth $100,000 cost only few dollars.
Which one should you choose?
It’s up to each user to decide which exchange they want to use, according to their specific needs. CeXs work well for people who want convenience but don’t feel comfortable with having to take care of their money. Platforms like Blockfinex offer the most convenience for trading cryptocurrency. If you want privacy and control over your funds, DEXs might be the best option.
Both CEXs as well as DEXs offer their own benefits, so it is not fair to say that one has more than the other. Each serves a different purpose and is therefore relevant to different users. And together, they facilitate the broader blockchain-cryptocurrency domain, boosting adoption in the process.