*WHAT IS A CRYPTOCURRENCY EXCHANGE*
Before we begin discussing the topic of centralized vs decentralized cryptocurrency exchanges, we should first understand what a *cryptocurrency exchange is* . They refer to places where you can buy or sell crypto. Every crypto exchange has its unique *rules and regulations, but they all provide you* access to the most prevalent cryptocurrencies.
*WHAT IS A CENTRALIZED CRYPTOCURRENCY EXCHANGE*
A centralized cryptocurrency exchange (CEX) is a platform where you can buy or sell digital assets. Here, you have to trust a third party to monitor the transaction and secure the assets on behalf of the buyer and the seller. Their deals aren’t tracked on the blockchain. Such exchanges require you to submit your personal information for verification, know your customer (KYC).
The more details you provide to these exchanges, the higher your withdrawal quota will increase. Verified users of these platforms can contact the support team of the exchange in case of any technical error or if they lose their password.
In most cases, centralized crypto exchanges provide their users with flat pairs at stable prices. These exchanges are widely popular among cryptocurrency users, and you can easily find one of these platforms online. Some examples of centralized cryptocurrency exchanges include Binance( highest volume), Coinbase, Kucoin, hotbit and others.
*What is a Decentralized Cryptocurrency Exchange?*
A DEx or a decentralized cryptocurrency exchange is similar to a centralized one, except it doesn’t have a third party on which you can rely. All of the funds in this exchange remain stored on the blockchain.
These platforms allow peer-to-peer (P2P) trading for which it uses assets, proxy tokens, or an escrow system, unlike the IOU-based system a centralized crypto exchange uses. Some examples of decentralize exchanges include: uniswap,pancakeswap,sushiswap,julswap and others.
[14/11, 10:11 pm] Crypto Lord: How does a Decentralized Cryptocurrency Exchange work?
In a DEx, the client (you) brings his/her cryptocurrency to the gate, which stores the same and gives the client proxy tokens in their place. The client can now use these tokens within the blockchain of this exchange. The real cryptocurrency present in the gates collateralizes these tokens.
You can order to sell your current tokens for another kind of tokens in exchange. Your order, its matching process, and all the consequent processes remain stored on the blockchain of the exchange, which is the first highlight of these places. When you receive any tokens through a transaction, you can convert them into real cryptocurrency as well.
[14/11, 10:12 pm] Crypto Lord: CENTRALIZED VS DECENTRALIZED CRYPTOCURRENCY EXCHANGES
Here’s a quick look at centralized vs decentralized cryptocurrency exchanges:
Centralized Crypto Exchange(CEX)
Decentralized Crypto Exchange (DEX)
*Control*
CEX.. *The platform has the most control*
DEX.. *User has the most control*
*Security*
CEX.. *Risk of hackers*
DEX ... *No chance of hacking or other dangers*
*Popularity*
CEX... *Highly popular*
DEX... *Not very popular*
*Fees*
CEX.. *Charges fees for using the platform.*
DEX.. *Charges zero or very minimal fees*
*Features*
CEX.. *Provides a variety of features*
DEX.. *Very few features available*
*Regulation*
CEX... *Easy to regulate, requires license from authorities*
DEX ... *Complicated to regulate; doesn’t require a license*
*Liquidity*
CEX... *High Liquidity*
DEX.. *Low Liquidity*
*Speed*
CEX.. *Executes orders in milliseconds*
DEX.. *Can take up to a minute to execute orders*