TLDR: CEXs offer ease, regulatory compliance, and fiat support; DEXs provide control, innovation, and lower fees. Popularity favors CEXs, but DEXs are on the rise.
This article is a summary of a You Tube video “CEX vs DEX: Which Crypto Exchange Is Better?” by CoinGecko
Key Takeaways:
- Definition of Crypto Exchanges: A marketplace to buy, sell, or swap crypto coins and tokens.
- Centralized Exchanges (CEXs): Operate with a centralized intermediary and an order book. Examples include Binance, Coinbase, Kraken, and Gemini.
- Features of CEXs: Require KYC and AML compliance, store users’ funds, and offer simplicity and ease of use for beginners.
- Decentralized Exchanges (DEXs): No central entity; transactions occur on a blockchain using smart contracts.
- DEX Varieties: Include order book DEXs, DEX aggregators, and Automated Market Makers (AMMs).
- AMMs and Liquidity Pools: AMMs use liquidity pools for trading, funded by liquidity providers who earn transaction fees.
- Control and Security: DEXs offer more control over assets and are less prone to cyber attacks compared to CEXs.
- Regulatory Compliance: CEXs are subject to regulatory requirements, whereas DEXs, being decentralized, are not.
- Trading Features and Liquidity: CEXs support fiat transactions and have higher liquidity, while DEXs often have lower liquidity and more innovative trading features.
- Popularity and Future Trends: CEXs are currently more popular, but DEXs are gaining traction due to lower fees and direct control of assets.
