The popularization of cryptocurrency and the wide range of possibilities leads to more and more people thinking about buying cryptocurrency. The next step is to decide where and how to buy it. There are many exchanges that make it possible to buy cryptocurrency. The most popular of them are these two types: CEX (centralized) and DEX (decentralized). Let’s compare them and find out what’s the difference!
CEX (WhiteBIT) vs. DEX: What’s the Difference?
Both types of exchanges are trading platforms where users can buy and sell cryptocurrencies. With similar goals, decentralized and centralized exchanges have a fundamental difference.
CEX (Centralized Exchange) is any centralized crypto exchange. It is usually managed by a single organization acting as an intermediary in the trading of cryptocurrencies between the two parties.
Responsibility for the preservation of assets is shared between the exchange and the user. For example, if you can’t access the funds due to the loss of a key, a team of security specialists will help you to restore it.
In fact, CEX exchanges work by using a business model similar to traditional stock exchanges with one exception: they trade cryptocurrencies rather than securities.
DEX (Decentralized Crypto Exchange) is an automated exchange based on blockchain technology (distributed registry) with decentralized management. When it comes to DEX, smart contracts are used for trading. As the name implies, there are no information processing servers and centralized management by any organization.
Such exchanges do not have an intermediary and function as peer-to-peer exchanges. Transactions (including purchase, request to purchase or cancel an order, etc.) are based on smart contracts and processed on the blockchain.
CEX (WhiteBIT): Pros & Cons
A great example of a CEX exchange is WhiteBIT, the largest European exchange from Ukraine, with over 3 million users worldwide. You can see the main advantages of centralized exchanges on WhiteBIT.
- Liquidity. For example, WhiteBIT has over 1B+ of average daily trading volume, and you can check the order book to see it. This means endless exchange possibilities at any time for users and the ability to withdraw even relatively large amounts within a couple of minutes;
- Fiat support. Centralized exchanges make it possible to convert fiat to crypto and crypto to fiat, which means the ability to buy a cryptocurrency for fiat and withdraw it to a bank card;
- Extended functionality. In addition to the usual exchange tool, there are also margin trading, futures trading, staking, etc.;
- A wide variety of trading pairs;
- The interface is simple and allows even beginners to navigate and solve their tasks without problems.
It is worth mentioning CEX’s attention to security. Centralized exchanges apply a whole range of actions to preserve the financial assets of users.
The disadvantages of CEXes include:
- a lower level of user anonymity, the need to pass customer KYC to be able to work with fiat and increase transaction limits;
- a higher level of control over transactions by the exchange.
DEX: Pros & Cons
DEX is the exact opposite of CEX: there is no central control, and all transactions are carried out directly between the parties.
The advantages of DEXes:
- such exchanges do not have access to user accounts and wallets;
- data is not stored on servers, which makes it impossible to hack an account or wallet;
- there are no restrictions on political, geographical, and other criteria;
- they are not under anyone’s jurisdiction: government agencies cannot close them.
DEX also has obvious disadvantages, some of which are actually opposed to the advantages of this type of exchange.
It should also be taken into account that DEX platforms are based on smart contracts, which creates a certain degree of risk. In this regard, it is recommended to use the services of only well-known DEX sites like WhiteSwap, which is part of the WhiteBIT ecosystem.
It is important to mention a few other cons:
- DEXes require a user to have certain skills and experience in transaction processing, unlike CEX, where everything is more simple and requires only intuitive actions from users;
- fiat is not supported;
- in most cases, liquidity is lower than on CEXes, which limits trading;
- DEXes has limited functionality compared to CEXes. Most often, such tools as limit orders, futures, margin trading, staking, etc. are not available to users;
- decentralized exchanges are not as fast and efficient as CEXes due to scalability issues. Centralized exchanges do not have this problem, as they use both on-chain and off-chain mechanisms to ensure smooth operations.
Both types of crypto exchanges make it possible to buy and sell cryptocurrencies, but they have a number of fundamental differences. The choice of the type of exchange depends on you, your priorities, tasks, and goals.
Scarlett is working as PR Manager with Coinfea. She has worked as a PR and Outreach executive with a reputed company in the past. She loves to create a good network of people and companies.