CEX and DEX: What are the differences?
Cryptocurrencies have some drawbacks when it comes to being marketed. The most notorious arises from the lack of confidence in users when it comes to making P2P (person-to-person) exchanges. This involves physically meeting a person (often unknown) to ensure that the funds will be transferred. Or on the other hand, it implies having to find a reliable person to carry out a remote transaction.
Consequently, the need arose to create exchanges or exchange houses focused on Cryptocurrency development company. An exchange allows users to entrust their digital assets to a trusted third party, so trades go smoothly. But it is also true that these platforms also have some drawbacks.
First, we need to understand how exchanges (or exchanges) currently work.
Centralized Exchanges (CEX):
A centralized exchange is an exchange managed by a company. The company has a CEO and employees and has full control over the exchange. These are similar to traditional stock exchanges, except that they deal in cryptocurrencies instead of stocks.
- There will be a third party operator
- Transactions in fiat currency will be allowed
- The entries will be in the database most of the time until the withdrawal or extraction of coins occurs
- Better trading speed (no real-time crypto node update)
- Liquidity will be more noticeable on the exchange
- Uso de Know Your Customer (KYC) y Anti-Money Laundering (AML)
- Prone to hacking the system
Decentralized Exchanges (DEX):
A decentralized exchange is not run by anyone. It has no CEO or employees. The exchange runs on top of blockchain technology and is sometimes controlled in a democratic manner whereby users participate in the decision-making processes of the exchange. Decentralized exchanges also do not rely on a third party to hold the cryptocurrency development company so it is faster to transact than on a centralized exchange.
- Transactions in fiat currency will not be allowed
- Most of the time, Market Takers will only be part of the platform
- The crypto trading transaction volume will be very less.
- Low-grade trading speed (due to real-time crypto node update)
- Liquidity will be the challenge (only handle Crypto Coins on Nodes)
- No, prácticas de Know Your Customer (KYC) y Anti-Money Laundering (AML)
- No private keys in the app
DEX works much better, since the private keys are not part of the application, while CEX, the user can retrieve their username.
CEX works with a third party or authority body, which offers volume and liquidity so that transactions can be carried out with greater speed, that is, CEX is faster than DEX.
KYC & AML facilitates the regulation and identity verification of users, this is used in CEX exchanges, due to this reason it can be said that it is against the main objective of “Satoshi-Nakamoto” — “Anonymity and decentralization”.
Finally, if you plan to participate in any of the Cryptocurrency exchanges , you must understand the difference between each of them so it will help you choose the right option.
- Control of funds
- Benefits of a decentralized exchange
- faster transactions
- Less vulnerable to hacking risk
The evolution of technology has brought great benefits to humanity, Blockchain has great potential in solving problems that the traditional system cannot, transparency, trust and information security that Blockchain can provide has led to the last 10 years have a growth and adoption of the largest companies and governments focusing it around the world in different sectors , exchanges also evolve and sooner or later the way how we can easily and with security guarantee be able to move our digital investments will be optimized.