Hello hivers, today I want to write about the different between Decentralized Exchange and Centralized Exchange.
First, what are cryptocurrency exchanges?
Cryptocurrency exchanges are online platform were its user can buy, sell and trade digital coins or tokens like Bitcoin (BTC) or Ethereum (ETH). Exchanges acts as a market that connect buyers and sellers together, giving them the room to buy and sell digital assets.
The decentralized and Centralized Exchanges are the main two types of exchanges and the both of them allows traders to trade but they are different in some certain structures, control and how it operate.
Lets look at how the two of them work:
**Centralize Exchanges (CEX): **These are exchanges or I can call it a platform that is operated by a company that manages funds and felicitates trades. It is fully controlled by the company. the users needs to deposite their funds (in crypto or in fiat) into the exchange wallets.
In CEX large amount of user are using the exchanges to trade making You to buy and sell your crypto at a price that is much closer to the current market price.
They offer an easy security insuch a way that you only need email verification and 2FA to protect your account. They have huge insurance to protect users funds incase of any hack. Since they are monitored by governments, they needed to meet the requirements of the government like KYC (Know Your Customers)and AML (Anti-Money Laundering).
EXamples of CEX are: Binance, Bitget, Gateio, Bybit etc.
Decentralized Exchanges (DEX): these are P2P market place that runs on a blockchain through a smart contracts. It uses no KYC that is why it has no central control over it unlike CEX that has a central authority that controls it.
The users of DEX uses connected wallets to trade directly using private keys to sign a contract, which authorizes the smart contract to use your tokens.
Every DEX user has a seed-phrase that gives them access to their assets in the wallet. Example of DEX are MetaMask, Uniswap, Pancakeswap etc.
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