Centralized vs Decentralized Exchanges: What's More Secure?

Simply put, crypto exchanges are platforms that allow you to buy and sell digital assets such as cryptocurrencies. Centralized crypto exchanges have an intermediary or a third party involved.

Advantages of a CEX

1. Intuitive User Interface - CEX makes it easy for beginner crypto investors and they also advanced trading by offering tools for a more experienced trader 2. Reliability- CEX can be quite reliable, they offer strong security and users get to enjoy a high level of comfort with an integrated crypto wallet for crypto transactions. 3. Leveraging in CEXs allows margin trading enabling crypto investors to enjoy high profits.

Disadvantages of a CEX

1. Security Risks - regardless of high security, CEXs are always at risk of getting hacked.  2. High Transaction Fees are a major concern with CEXs including inactivity fees, service charges, and a lot more. 3. Fraud risk- regardless of how legitimate a company is, CEXs always carry an inherent risk of fraud.

A decentralized crypto exchange dismisses the involvement of the third person and introduces a new notion to crypto exchanges. DEX employs automatically executed smart contracts to trade digital assets among individuals without taking hold of them in real life.

DEXs employ these mechanisms to execute a trade: Order Books that are entirely decentralized and put together all the currently available buy and sell offers. DEXs have On-chain Order books and Off-chain order books. Swapping- Swaps are the instantaneous trades executed between the user’s digital wallet. Some notable DEXs include Uniswap, Curve, SushiSwap, and Kyber.

DEX Advantage

1. Privacy- DEX provides the required privacy as it does not take hold of the user’s tokens, unlike CEXs. 2. Various Options to be explored and made use of in the index market. 3. Decreased Risk - As you own the keys to your private wallets, you are at a lesser risk of hacks.

DEX Disadvantage

1. Complications - Many DEXs require tokens of the Ethereum network to work like a looping exchange. The trader needs an extra step of conversions before they can trade.  2.  Only cryptocurrency assets - Decentralized exchanges are limited to only cryptocurrency assets.  3. Lack of customer service - If you run into issues, you will have to figure the solutions out yourself.

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