CEX vs DEX: Choosing Crypto Trading Platforms

Supporters of decentralized exchanges emphasize security, advocating for users to maintain control over their cryptocurrencies by holding them in personal wallets and managing their private keys. This ensures exclusive access to funds, a fundamental principle in the crypto realm. Conversely, centralized exchanges require users to deposit coins into the exchange's wallet, relinquishing some control. Despite this, centralized exchanges often offer robust security measures, albeit not as accessible to the average investor.

On DEX, users retain control over their assets by connecting wallets to smart contracts. However, vulnerabilities in smart contracts pose a risk, as highlighted by industry leaders.

DEX appeals to privacy enthusiasts as they typically don't mandate identity verification. This differs from centralized exchanges, which often require Know Your Customer (KYC) procedures. Additionally, DEX users enjoy trading freedom regardless of location, unlike centralized platforms with stringent verification processes.

Liquidity, crucial for traders, varies between CEX and DEX. Centralized exchanges generally boast higher liquidity due to user-friendly interfaces attracting institutional investors and high-frequency traders. In contrast, DEX liquidity relies on user-contributed liquidity pools, limiting its depth.

Despite growing interest, DEX accounts for a mere 7% of spot trading volume, far from its peak of 14.5% in May 2023, as reported by The Block. This indicates that while DEX offers unique benefits, centralized exchanges remain dominant in trading volume and user adoption.