4:26
novice
June 13, 2022
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what are the advantages and disadvantages of CEXs and DEXs?

The terms centralised and decentralised are commonly used in the crypto world. Centralised and decentralised currencies have differences in security, privacy, usability, liquidity, control, speed, fees, and several other areas. In this article, we will explain the advantages and disadvantages of centralised exchanges (CEXs) and decentralised exchanges (DEXs). For the definition and the difference between a CEX and a DEX, see the shorter article here.

*The content hereby presented is for informational purposes only. Nothing of this content that is available to you shall be considered as financial, legal or tax advice. Please, keep in mind that trading cryptocurrencies pose a considerable risk of loss.

CEXs advantages

CEXs are easier to regulate. They need operating licenses, and adhere to regulatory requirements.

The liquidity available on CEXS is higher. Users on these exchanges place orders based on market trends. As a result, a large number of users purchase and sell an asset that is in high demand. Market makers are also present on these exchanges, enhancing the platform's liquidity.

Crypto exchanges that are centralised are faster, they complete orders at an average of 10 milliseconds.

DEXs advantages

DEXs are very hard to exploit since a hacker would have to compromise every user which is almost impossible. The peer-to-peer (P2P) form of the system allows minimal to no space for infiltration or manipulation.

Decentralised platforms do not require transaction fees.

Users who utilise decentralised currencies have significantly greater privacy protections than those who use centralised currencies. P2P transactions can be done with near-total anonymity, allowing money to be exchanged by nearly anybody for any purpose without having to go through the Know Your Customer (KYC) procedure that centralised corporations demand.

In the case of a DEX, the platform is controlled by the users, not the platform itself. This is one of the most important reasons for the popularity of DEXs.

CEXs disadvantages

CEXs are far more vulnerable to hacking and data breaches compared to DEXs although they have very strict security procedures. To gain access to users' holdings, financial information, and other potentially damaging data, a hacker simply has to bypass the protections of the firm that runs the exchange.

Users of centralised crypto exchanges are required to pay a transaction fee to the exchange in order to access their services.

Also, they come at the expense of control. They have been accused of manipulating the values of their currencies on various occasions, and users do not always have total control. Due to withdrawal limitations and market factors, users may not be able to access their funds immediately, and in the worst-case situation, the funds may not be available at all.

DEXs disadvantages

Regulating DEXs is difficult due to the massively dispersed blockchain. As a result, even if a prohibition is in place, a DEX can function in such areas.

DEXs have an issue in that they make it very difficult to receive funds rapidly. Users are frequently limited in how much they can spend at once and must go through multiple processes to convert the value on their displays to fiat currency, especially as very few companies currently accept Bitcoin (BTC).

In general, DEXs have low liquidity also due to the relatively long time it takes to execute an order: 15 seconds is the minimum.

*The content hereby presented is for informational purposes only. Nothing of this content that is available to you shall be considered as financial, legal or tax advice. Please, keep in mind that trading cryptocurrencies pose a considerable risk of loss.

what are the advantages and disadvantages of CEXs and DEXs?

The terms centralised and decentralised are commonly used in the crypto world. Centralised and decentralised currencies have differences in security, privacy, usability, liquidity, control, speed, fees, and several other areas. In this article, we will explain the advantages and disadvantages of centralised exchanges (CEXs) and decentralised exchanges (DEXs). For the definition and the difference between a CEX and a DEX, see the shorter article here.

CEXs advantages

CEXs are easier to regulate. They need operating licenses, and adhere to regulatory requirements.

The liquidity available on CEXS is higher. Users on these exchanges place orders based on market trends. As a result, a large number of users purchase and sell an asset that is in high demand. Market makers are also present on these exchanges, enhancing the platform's liquidity.

Crypto exchanges that are centralised are faster, they complete orders at an average of 10 milliseconds.

DEXs advantages

DEXs are very hard to exploit since a hacker would have to compromise every user which is almost impossible. The peer-to-peer (P2P) form of the system allows minimal to no space for infiltration or manipulation.

Decentralised platforms do not require transaction fees.

Users who utilise decentralised currencies have significantly greater privacy protections than those who use centralised currencies. P2P transactions can be done with near-total anonymity, allowing money to be exchanged by nearly anybody for any purpose without having to go through the Know Your Customer (KYC) procedure that centralised corporations demand.

In the case of a DEX, the platform is controlled by the users, not the platform itself. This is one of the most important reasons for the popularity of DEXs.

CEXs disadvantages

CEXs are far more vulnerable to hacking and data breaches compared to DEXs although they have very strict security procedures. To gain access to users' holdings, financial information, and other potentially damaging data, a hacker simply has to bypass the protections of the firm that runs the exchange.

Users of centralised crypto exchanges are required to pay a transaction fee to the exchange in order to access their services.

Also, they come at the expense of control. They have been accused of manipulating the values of their currencies on various occasions, and users do not always have total control. Due to withdrawal limitations and market factors, users may not be able to access their funds immediately, and in the worst-case situation, the funds may not be available at all.

DEXs disadvantages

Regulating DEXs is difficult due to the massively dispersed blockchain. As a result, even if a prohibition is in place, a DEX can function in such areas.

DEXs have an issue in that they make it very difficult to receive funds rapidly. Users are frequently limited in how much they can spend at once and must go through multiple processes to convert the value on their displays to fiat currency, especially as very few companies currently accept Bitcoin (BTC).

In general, DEXs have low liquidity also due to the relatively long time it takes to execute an order: 15 seconds is the minimum.

*The content hereby presented is for informational purposes only. Nothing of this content that is available to you shall be considered as financial, legal or tax advice. Please, keep in mind that trading cryptocurrencies pose a considerable risk of loss.

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