The Difference Between Centralised and Decentralised Cryptocurrency Trading Exchanges
High volatility of cryptocurrencies open a lot of earning opportunities for traders and investors, who buy crypto and sell it at different prices. They apply various methods that imply buying and selling assets with different frequencies. That are intraday trading, scalping, swing trading, position, and arbitrage. The processes of buying and selling assets take place on crypto exchanges.
A crypto exchange platform is a website where all operations with digital assets take place. Such services can be of the following types:
What is CEX?
CEX is a centralized crypto exchange with the following characteristics:
- Such platforms operate officially. They have registration and comply with regulations.
- Such exchanges allow users to buy digital assets with fiat money and offer fiat-crypto pairs.
- In the process of crypto transactions, funds are stored on an exchange’s servers.
- CEX ensures client safety and offer several layers of account protection.
- CEX offers a large selection of trading tools and allows using leverage (borrowed funds) in trading.
- Such platforms offer a wide range of trading pairs.
- The opportunity to withdraw and deposit an account with cash.
Examples of centralized crypto platforms are Binance, WhiteBIT, Coinbase, and Huobi.
What is DEX?
Decentralized exchanges are different from CEX. First, DEX does not hold users’ assets on its servers – funds move between users’ wallets. So DEX is not responsible for clients’ safety and does not provide it. The next difference is the availability of trading tools. DEX cannot offer such advanced financial instruments as futures, margins, etc.
DEX are suitable for small amount trades. They do not require user verification. Examples of DEX are SushiSwap and UniSwap.
Both types of trading platforms are used by crypto investors. It is up to you to decide what service to pi; the main is to check its reputation, fee policy, current crypto rates, and availability of trading tools.