The crypto trading market has multiple trading options, and since no government institution regulates it, people prefer this form of economic management. However, the argument remains: “Decentralized Exchange (DEX) and CEX Centralized Exchange (CEX), which is better?”
In all fairness, no one can decide the ideal option for any trader, but here is a pros and cons review of DEX-es and CEX-es platforms.
CEX – Despite having no government regulations, Centralized Exchange platforms depend on sole authority to function correctly. It works on the principle of order books to help users track and confirm their crypto exchange payments. If you want to become a user, you need to go through KYC (know your customer), ID verification, email verification, address proof, and biometrics to become a registered user.
When using these platforms, you cannot swap assets without going through the exchange’s broker, telling them exactly how much the asset costs, and waiting till you get credits. For example, if you want to sell some of your crypto assets, you must make a request, which belongs in the order book. Afterward, you would have to wait until a buyer wants what you have before that order is cleared.
Pros
- Transactions are recorded – since centralized exchanges use to order books, you can track your transactions and return them to them. It is a safe way to make payments and provide evidence for the necessary entities.
- Friendly user interface – CEX-es typically have user-friendly interfaces ideal for even amateurs.
- Security – CEX platforms have multiple security layers that ensure your transaction doesn’t get lost. Also, these platforms actively monitor and restrict fraudsters to ensure users feel safer.
- Financial leverage – Centralized exchange platforms allow users to leverage their investments using borrowed money from these platforms, thereby increasing their interest rate. This opportunity can also result in debt.
Cons
- Hacking risks – Centralized exchange platforms are at a higher risk of hacking because they store users’ passwords within the applications. Also, they store millions of bitcoins, making them invite scammers. For example, in 2014, Mt. Gox filed for bankruptcy after 850,000 bitcoins were stolen from the platform after the hacking of Alexander Vinnik.
- High transaction fees – Since the sole authority runs these platforms, they charge for every transaction, and those fees are ridiculously high.
- Third-party fraud – When you store your crypto in your CEX wallet, it is not in your wallet. Instead, it stays in the platform’s wallet, making your assets susceptible to fraud, and if they ever experience bankruptcy, it will affect you.
DEX – Decentralized exchange platforms, e.g., Bisq works by connecting crypto buyers to sellers. It has no authority or regulatory bodies making rules on the platform and uses an order book to record transactions.
Pros
- Requires minimal customer information When creating an account on a decentralized exchange platform, you do not need to provide personal information or save your email, or phone number, which are also optional.
- Direct trading – On DEX platforms, there is no third party. So, buyers and sellers can swap assets without transactional fees and keep their crypto in personal wallets.
- Decentralized server network – DEX platforms have decentralize server networks that ensure your transactions are not affected by server failure. Also, because of this network, there is little to no chance of a security breach.
Cons
- It is not suitable for fast-changing market trends – Although DEX platforms are not regulating, miners still work underground to ensure transactions move swiftly. Since they are working manually, transferring assets takes a lot of time, leading to lags on the platforms.
- Data loss is prevalent – DEX platforms have no customer information, meaning you can’t track your transactions or cancel orders. If you ever lose your private key, you will lose access to your account and all assets.
Conclusion
DEXs aim to make crypto transactions easy and cheap, while CEXs secure crypto exchanges. Decentralized exchange platforms give you complete control over your funds, while CEXs use third-party wallets to keep your assets.
Obehi Iyobhebhe is a professional ghostwriter with five years of experience. She has worked with magazines, NGOs, B2B organizations, celebrities, fashion, travel, health, and dating blogs.
Obehi likes to create conversational content that helps readers solve real-world problems. You can read more of her work on Medium. Or send her a message at ob***********@gm***.com.
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