CEX vs DEX: Which one should you choose?

In simple terms: CEX is like a bank, DEX is like a vending machine. One is safe and convenient, the other is free but requires you to know how to use it.

What are the differences between the two exchanges?

Centralized Exchange (CEX) — Platforms like Binance, where a company is managing everything behind the scenes. You need to register, verify your identity, and then deposit coins to trade. The whole process is quite similar to opening a bank account, and you don't need to understand blockchain technology at all. The platform helps you manage your funds, and if there are any issues, you can contact customer service.

Decentralized Exchange (DEX) — Operates entirely through smart contracts without any management. You connect with your own wallet and interact directly with the liquidity pool. No registration, no identity verification, but also no customer service. Your funds are completely under your control, but if you make a mistake in your operations, no one will save you.

Advantages of CEX

Quick to Get Started: Beginners can directly buy cryptocurrencies with fiat (bank cards), the interface is user-friendly, and the tutorials are comprehensive. There is no need to learn about concepts like Gas fees and slippage.

Guaranteed: Lost your password? Customer service can help you recover it. Sent to the wrong address? The platform might be able to assist in reversing it. You don't have to manage the private key yourself; if something goes wrong, someone is responsible.

Full Service: Trading, lending, mining, NFT marketplace… everything is available. You can handle it all on the same platform, and there are no transfer fees.

The Pitfalls of CEX

Easily Hacked: Centralized systems are like a big safe, making them prime targets for hackers. Once breached, the coins inside may be gone. Historically, Mt. Gox serves as a cautionary tale.

High fees: It seems simple, but there are quite a few hidden charges. Withdrawals cost money, trades cost money, and sometimes inexplicably, more is deducted.

Not entirely yours: When you deposit coins into an exchange, you lose your private keys. If the exchange goes bankrupt, your coins may be lost. It's like putting cash in a bank; if the bank has trouble, you can't do anything.

Advantages of DEX

True Sovereignty: The private key is in your own hands, and no one can freeze your funds or restrict your actions. This is what it truly means when we say “your coins are yours.”

Strong Privacy: No need to upload identification, no verification required, anyone in the world can use it. No KYC, personal information will not be stolen.

Low Barrier to Entry: As long as you have a wallet and some coins, you can trade. No matter which country you are in, you can access it.

New Tokens: Many small projects are only available on DEX when they first launch, and haven't yet listed on CEX. If you want to get new tokens, DEX is the way to go.

The Pitfalls of DEX

Too Hard to Get Started: Beginners can be confused by concepts such as Gas fees, slippage, and liquidity right from the start. A single operational mistake (like setting Gas fees too low) can lead to being stuck or losing coins. No one can save you.

No fiat channels: DEXs generally do not support buying cryptocurrencies directly with bank cards or Alipay. You first need to exchange fiat for cryptocurrencies on a CEX, and then transfer them to a DEX. One more step, one more risk.

Poor liquidity: Only large exchanges can provide sufficient liquidity. If trading volume is high on a DEX, the price slippage can be very noticeable, and you may end up buying at a much higher price than expected.

How to choose

Newbie, want to be safe? → Use CEX

• Buying your first coin? CEX is the easiest.
• Don't want to learn technology? CEX is enough
• Need help? CEX has customer service.

Want to explore DeFi and speculate on new coins? → Use DEX

• Want full control of your funds? DEX is the best.
• Want to mine new projects? There are many opportunities on DEX.
• Willing to take on risks yourself? DEX has the highest degree of freedom.

Smart people's strategy: Use both. Buy mainstream coins on CEX and transfer them to DEX to play new projects. CEX as the base camp, DEX as the adventure land.

Final Words

There is no absolute good or bad between CEX and DEX, only what is suitable. Playing with DEX right after entering the space can easily lead to problems, while using CEX is sufficient for stable trading. However, if you want to experience the complete ecosystem of DeFi and gain more opportunities for profit, you will eventually need to learn DEX. Suggestion: First establish a solid foundation in CEX, then gradually explore the world of DEX.