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October 5, 2022

Decentralized vs. Centralized Exchanges: What's the Difference?

When it comes to cryptocurrency exchanges, there are two main types: decentralized(DEX) and centralized(CEX). Both have their pros and cons, but which one is right for you? In this blog post, we'll break down the key differences between decentralized and centralized exchanges so you can make an informed decision about which type of exchange is right for your needs.

What's the difference?

A centralized exchange is a traditional type of exchange that is run by a single entity. Coinbase, Binance, and Kraken are all examples of centralized exchanges. A decentralized exchange, on the other hand, is an exchange that is not run by a single entity. Rather, it is run on a decentralized network of computers. EtherDelta and IDEX are both examples of decentralized exchanges.

There are a few key differences between centralized and decentralized exchanges that are worth mentioning. First, with a CEX, you are entrusting your funds to a single entity. This means that if the exchange is hacked or goes bankrupt, you could lose all of your funds. With a DEX, however, your funds are stored in a smart contract on the blockchain. This means that even if the exchange itself is hacked, your funds will still be safe because they are stored on the blockchain.

Another key difference has to do with trading fees. Centralized exchanges typically charge higher trading fees than decentralized exchanges because they have more overhead costs. Decentralized exchanges, on the other hand, have lower overhead costs and as a result, can offer lower trading fees.

Finally, it's worth mentioning that centralized exchanges are typically much faster and easier to use than decentralized exchanges. This is because centralized exchanges don't rely on the slow speed of the blockchain for processing trades. Rather, they have their own internal systems for processing trades quickly and easily. Decentralized exchanges, on the other hand, do rely on the slow speed of the blockchain for processing trades. This can result in slower trade execution times and a less user-friendly experience overall.

So there you have it! Those are some of the key differences between centralized and decentralized exchanges. CEX are typically easier to use but charge higher fees. DEX charges lower fees but can be more complicated to use. Ultimately, which type of exchange you use is up to you and should be based on your specific needs and preferences.

Jacques Potts - Sr. Marketing Manager at Ledgible and experienced financial author, marketer, and crypto expert. His work has been featured on The Street, Project Serum, FirstTrade, and Invstr.
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