Crypto for Beginners: CEX v DEX

Crypto for Beginners: CEX v DEX

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The best place to start when you’re looking to store your digital assets is actually from where you’ll be purchasing the asset yourself in the first place…

 

In this blog post, we’ll be taking a look at two of the ways in which you can start to purchase cryptocurrencies and digital assets, so that you can start your trading journey. 

We’re going to take a look at the difference between centralized exchange platforms, as well as decentralized exchange platforms. 

 

Where to store your assets?

Generally, when you’re just starting out in crypto, you’ll buy your chosen coin or token from something called an “exchange”.

There are two types of exchanges, centralized, and decentralized exchanges.

Let’s get into it! 

 

What is a centralized cryptocurrency exchange (CEX)?

 

CEX examples

 

A centralized crypto currency exchange platform is a platform which will allow you to buy and sell crypto currencies under the supervision of a third party.

You’ll generally have to pass some KYC steps (filling out information about yourself and your identity) before being able to buy directly from a CEX. This ensures that the exchange is made securely.

 

This system is the most popular due to its simplicity and effectiveness. 

You can generally buy digital assets in a couple of minutes if you have all the information you need to hand, and the platforms are generally user friendly. 

 

A couple of examples of some popular CEX platforms are the following: 

 

What is a decentralized cryptocurrency exchange (DEX)?

 

DEX examples

 

A decentralized cryptocurrency exchange, or DEX, is a platform on which you can purchase cryptocurrencies or digital assets without the supervision of a third party.

DEX’s use something called an “automated market maker” to determine the prices of assets listed on their exchanges. The AMM protocol matches the request and connects users directly without needing the involvement of a third party.

 

This kind of platform is often preferred by crypto-fans due to its anonymity - which is much more in keeping with the Web3.0 and crypto movement generally, than having to fill out KYC forms and compliance documents.

Though using a DEX will ensure that your identity is not as easy to trace as if you were using a CEX to perform transactions, and the risk of security threats is reduced, it is also very difficult to regulate, and will the mass-adoption of cryptocurrencies being widely spoken about, it is something to consider, as regulation will most likely need to be adopted in order for mass-adoption to actually take place.

 

Here are a couple of examples of DEX’s: 

 

Which one to choose: CEX v DEX

 

FEATURE DETAIL WINNER
Efficiency This round definitely goes to CEX where the transactions just take seconds to complete, you will often see your transaction reflected in your balance just moments after you create the order or transaction itself. CEX
Liquidity CEX’s benefit from the fact that there are higher volumes of trading taking place on their platforms than on DEX’s. Their ease of use makes them a great gateway tool to crypto and digital asset markets, meaning that many people will choose to handle their transactions within a CEX.  CEX
Security

In this case, DEX is built against hackers. No foul-play would result in you losing your assets, unless you are initiating the transaction. The same cannot be said for CEX’s, on the other hand - as they are centralized platforms that could, in theory, be breached. 

DEX
Control and regulations To operate with CEX the user will need to pass the KYC barrier before being able to actually engage with the exchange, this means that only people who have completed the KYC requirements and who are approved can go on to create orders and transactions within the platform. With DEX’s, however, there is no KYC to be completed, so it is very difficult to regulate who is making which transactions and why.  CEX
Fees CEX users need to pay a transaction cost for the platform's service. These can vary in price and will largely depend on the platform, but there are tools like Blockchainr which allow you to buy crypto directly from the platform at the best price possible.  DEX

 

As you can see, there are many options available to you when it comes to choosing which exchange you’d like to use to start your crypto journey. 

We hope you found this short post useful, and that you will make the decision to trade on a platform that best suits you!

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