Centralized vs. Decentralized Crypto Exchanges: Custody, Trading, and Risks
Summary
The document compares centralized exchanges (CEXs), which custody customer funds and commonly use internal matching engines, with decentralized exchanges (DEXs), where users trade from their own wallets through smart contracts. It contrasts their typical custody arrangements, liquidity, fees, privacy, onboarding, support, and trading features. It also notes that DEXs may use automated market makers or on-chain order books, while network congestion can affect execution and costs.
The main decision framework is to weigh convenience, fiat access, liquidity, and customer support against self-custody and pseudonymous access. The risks differ: CEX users depend on the provider’s security and solvency, while DEX users must protect their keys and face contract vulnerabilities. The article includes extensive exchange promotion, but offers no independent comparative measurements or evidence for specific platform claims. Its generalizations about fees, liquidity, and safety depend on the exchange, asset, and network.
Key ideas
- CEXs custody user assets and generally execute trades through company-operated systems.
- DEX trades are initiated from user wallets and settled through smart contracts or on-chain mechanisms.
- CEXs commonly emphasize fiat access, support, and liquidity, while DEXs provide more direct asset control.
- Self-custody shifts key management and recovery responsibility to the user.
- Exchange security, liquidity, fees, and execution vary by provider and network.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.