CEX and DEX exchanges: What is the difference and what to choose?

In the worlds of cryptocurrency and digital assets, exchange and trading platforms are key players. Whether to choose a centralized (CEX) or decentralized (DEX) exchange depends on a bunch of factors, including the security level, user experience, liquidity, and fees. Below, we are going to take a closer look at specific features, benefits and drawbacks of every type of exchange, and this knowledge will help you make informed decisions.

Centralized exchanges are the most common type of cryptocurrency platforms.  They are run by a single operator who controls all transactions and user assets. In other words, centralization is a distinctive feature of any CEX.

 Advantages of CEXs

1. High liquidity. Usually, centralized cryptocurrency exchanges have a large number of users and a large amount of trading. This ensures that their liquidity levels are high and order processing is fast.
2. Ease of use. Centralized exchanges often offer a user-friendly interface and features that make them more attractive for a wider range of users.  Even a newbie can easily learn to trade on CEXs. Customer support and educational resources also contribute to CEX popularity.
3. Wide selection of assets. CEXs offer a large number of various cryptocurrencies and trading pairs, including rare and new assets.
4. Value-added services. Many CEXs offer additional financial services, such as margin trading, staking, lending, and futures contracts.

 Disadvantages of CEXs

1. Centralization and security threats. Since any CEX is a platform that is run by a single operator, it is more vulnerable to hacker attacks and fraud. At various times, many large centralized exchanges were hacked, resulting in significant losses of user funds.
2. Regulatory risk. CEXs are required to comply with laws and regulations of the countries in which they operate. This may include KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements, thus limiting the anonymity of users.
3. Limited control over assets. CEX users do not have a full control over their funds, as their assets are kept in exchange wallets. This creates more risks in case the exchange goes bankrupt or commits a fraud.
4. Possibility of account blocking. If CEX representatives decide that you are in breach of their platform’s rules of uses or has committed any wrongdoing, your account may be blocked.  Often, it is not so easy to get it unblocked.  If you encounter such a situation and fail to resolve the problem by applying to the technical support team, SEVEN SENSES are always there to help you with our Unblocking an Account on Centralized Platforms service. Contact us and we will regain access to your funds for you.

Decentralized exchanges use the blockchain and smart contract technology and therefore do not need intermediaries and can provide direct trading between users. A DEX is always decentralized, which resonates with a large portion of the global crypto community.

 Advantages of DEXs

1. Security and control over assets. There is no such thing as a single DEX wallet — users keep their assets in their personal wallets and have full control over them. This reduces the risk of hacks and fraud, since decentralized cryptocurrency exchanges have no access to funds of their clients.
2. Anonymity. DEXs do not require KYC or AML verification, thus enabling users to trade anonymously and keep their data confidential.
3. No regulatory pressure. Decentralized exchanges are less subject to regulatory control, as they are not run by a single organization and do not store users’ data. Therefore DEX trading is available to users in any jurisdictions.

 Disadvantages of DEXs

1. Low liquidity. As a rule, DEXs have lower liquidity than CEXs, and this may lead to delays in execution and greater slippage. Among other things, this is due to the fact that a large share of the market is occupied by the older centralized platforms, such as Binance.
2. Complexity of use. For the most part, DEXs have less user-friendly interfaces and require that users have a certain degree of technical competence. Beginners may have difficulties with figuring out how the settings and other procedures work. Therefore DEX trading is more suitable for more experienced users.
3. Limited selection of assets. DEX tokens and currency pairs are usually fewer than those found on CEXs. This limits the opportunities for portfolio diversification, arbitrage on DEXs, etc.
4. No value-added services. Decentralized exchanges usually do not offer services such as margin trading or staking, which can be seen as a disadvantage for experienced traders.  This is also true for the limited selection of coins on DEXs.

Now that we know the difference between CEX and DEX, we can turn to the question of choice. It will depend on the user’s specific needs, experience and priorities.

 When to choose CEX?

• If you are just starting to trade in cryptocurrencies. Centralized platforms will offer you a more convenient interface, educational resources, and customer support. A relevant list of CEXs available to Russian users is still quite long.
• If you need high liquidity and quick access to a broad range of assets.
• If you need extra services, that is if you are planning to use margin trading, staking, or other financial tools.

 When to choose DEX?

• If security and control over assets are a priority for your, a decentralized cryptocurrency exchange will offer you a higher level of protection.
• If you value privacy and want to trade anonymously, decentralized platforms will allow you to avoid KYC and AML verification. Because of this the rating of DEXs in the crypto community is quite high.
• If you support the idea of decentralization and want to use platforms operating without intermediaries, a DEX will be your best choice.

In Russia, users have access to various centralized and decentralized cryptocurrency exchanges. The most popular of them are listed below.

 Most popular CEXs

1. HTX (former Huobi). A large international cryptocurrency exchange with a wide selection of cryptocurrencies and trading tools. Huobi has an interface in Russian, offers margin trade and staking services. In other words, it has everything but direct purchase of cryptocurrency for rubles.
2. OKX. An international cryptocurrency exchange with a wide selection of assets and trading pairs. OKX has low fees, margin trading and derivatives. Currently it has a restriction — P2P ruble transactions are banned.
3. KuCoin. Another popular international exchange offering a wide range of cryptocurrencies and trading pairs. It only prohibits the use of sanctioned Sber and Tinkoff banks.
4. Bybit. The exchange is in the top three cryptocurrency platforms according to CoinMarketCap. It opens access to dealing in 1,000+ cryptocurrencies and derivatives, spot and margin trading, transactions in options and futures. The ruble is available on the P2P market here, but there are restrictions on payment methods.

Top DEXs

1. Uniswap. The platform consistently tops the list of DEXs. Powered by Ethereum, Uniswap allows its users to exchange tokens directly via smart contracts without intermediaries. In addition, the exchange maintains high levels of security and anonymity.
2. PancakeSwap. A decentralized exchange built on the Binance Smart Chain (BSC). It offers quick and cheap transactions, token exchange, liquidity farming and staking. The exchange is popular among those users who look for an alternative to Ethereum-based platforms.
3. Curve Finance. The platform is one of the best DEXs. It is specialized in stable token pairs, offering low slippage and fees. It is built on the Ethereum blockchain.

So, both centralized and decentralized exchanges have their unique benefits and drawbacks. Choosing between the two depends on users’ specific goals and preferences. CEXs are good for newbies and those who value convenience and a wide selection of assets. More experienced users who seek maximum security and anonymity may give preference to decentralized platforms. After all, it may be best to use both types depending on your particular situation and needs. And experts from SEVEN SENSES will help you solve any problem you may encounter with exchanges, be it a blocked account on a CEX or any cryptocurrency incident.