Complete Understanding of the Differences Between CEX and DEX in 5 Minutes

There are two main types in the world of crypto asset trading.

CEX (Centralized Exchange): Well-known exchanges like Binance, Coinbase, and MEXC. Assets are deposited at the exchange for trading. It’s fast and highly liquid, but there are hacking risks, like the Mt. Gox incident or the FTX collapse.

DEX (Decentralized Exchange): Assets are managed in your own wallet. There’s less risk of being hacked, but transactions are slower and fees are higher. Plus, since KYC isn’t required, anyone can list tokens.

Historically, Uniswap in 2018 was a turning point. It saw explosive growth during the “DeFi Summer” of 2020, reaching over $29 billion in trading volume. The introduction of AMM greatly improved DEX efficiency.

There are two types of DEXs:

• Order Book Type (dYdX, Loopring): Similar to CEX. Has gas fee issues.
• Liquidity Pool Type (Uniswap, Curve): Anyone can provide liquidity via AMM. This is the mainstream.

Conclusion: CEXs are dominant now, but if blockchain’s challenges are solved, DEXs are highly likely to take a significant share.

Reference prices: ETH $2,719 (+1.82%) | BTC $83,766 (+1.01%)