CEX and DEX: The Differences

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CEX and DEX: The Differences

The cryptocurrency market offers numerous services and tools for users. The most popular platforms for cryptocurrency trading are Binance, Coinbase, OKEx, and WhiteBIT, Huobi. They all belong to a centralized type of exchange (CEX). Such services of CEX and DEX operate officially and comply with regulations and laws. Their work can be compared with traditional banks with centralized management. It is both a benefit and a disadvantage for CEX. On the one hand, users are not solely responsible for their investments since the CEX guarantees the safeguard of users’ funds. On the other hand, such platforms demand client verification, which means that every user has to provide documents for identification. KYC is meant to secure the exchange and its clients from illegal activity and ensure a high level of protection.

Another benefit of CEX is that it offers a wide selection of trading tools. The exchanges mentioned above offer numerous earning opportunities such as:

  • margin trading (trading with borrowing funds);
  • spot trading;
  • futures trading (forecasting the future price of an asset);
  • and many others.

The next thing worth mentioning is that CEX always has the full range of crypto assets and often the opportunity to trade pairs with fiat currencies. 

Passive income is another advantage of CEX. Large crypto platforms allow receiving profit by keeping your investments on the exchange for some time, called “staking”.

Since centralized exchanges are more common, they always propose high liquidity. It is simple to explain: users often follow the market trends, buying the same assets. This increases the platform’s liquidity.  CEX often uses crypto market makers to add liquidity as well.

To start working, CEX always has to pass checking and ensure it complies with the regulations. CEX always keeps track of transactions, noticing suspicions and unusual activity. Once noticed, such accounts can be suspended. It provides a high level of security for CEX users.

DEX

Another type of platform is decentralized (DEX). Decentralized exchange is a cryptocurrency trading platform that operates as an intermediary between users. Examples: popular SushiSwap, PancakeSwap, UniSwap. These are reliable sites for trading. 

A good thing about DEX is that users don’t have to provide their documents and even don’t have to register. You can just start trading right away. Usually, experienced traders use both CEX and DEX. Decentralized platforms are suitable for daily trading with small amounts. CEX is rather for keeping your investment capital and large-scale transactions. 

However, DEX does not provide safety. Unlike CEX, DEX does not keep your funds on its servers – coins just move between users in the process of exchange. Thus, security is out of the question.

On DEX, you will not find various trading tools like CEX offers. 

Wrapping up, we can say, both exchange types are suitable, depending on users’ needs. For beginners, we recommend starting with CEX, for they are usually more convenient and user-friendly. 

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