They typically require you to upload a photo of your face and a valid identity card to buy and sell crypto or make withdrawals. Centralized exchanges are subject users to strict KYC policies. Strict Know-Your-Customer (KYC) Policiesįor users looking to maintain privacy while trading, a CEX is not the go-to exchange. While centralized trading platforms offer many of the benefits investors are used to from their online brokerage accounts, they come with a handful of significant drawbacks. Moreover, they function almost in the same way as online brokers, thus acting as a familiar face to traditional investors. Some CEX platforms, like Binance, have lite versions for users looking to make basic trades. Considering that most newbies are unfamiliar with crypto pairs or simple terms like ‘going long or short,’ CEXs do a great job funneling users into the crypto space. One endearing quality of most CEXs is the user interface. More FeaturesĪside from the vast array of digital assets that CEXs support, they offer a lot more features other than exchanging one asset for another, such as margin trading, crypto derivates trading, exchange staking, and margin lending, among others. Fiat/Crypto and Crypto/Fiat Currency ConversionsĬentralized exchanges typically support fiat to crypto on and off-ramps, meaning that they allow you to buy bitcoin with US dollars, for example.
For experienced traders, CEXs provide a way to move relatively large amounts of funds in and out within minutes. For newbies, these active platforms essentially guarantee that their assets can be exchanged seamlessly at any time. Binance, for example, regularly records more than $30B in daily trading volumes. Trading VolumesĬentralized exchanges are typically highly liquid. While centralized exchanges are widely considered less secure than their decentralized counterparts because they store user funds, they come with an array of features and benefits that drive users towards them. Let’s dive into the pros and cons of each exchange type to learn more about what each trading platform has to offer and how the two differ. The main difference between centralized and decentralized exchanges is that the former has control over your funds while you are interacting on the trading venue while, with the latter, users retain control over the funds while trading.īut fund security is not the only difference between the two types of exchanges. They function essentially the same way as online brokerage accounts, which is why they are so popular among investors.ĭecentralized exchanges (DEX), like PancakeSwap or Uniswap, are autonomous financial protocols powered by smart contracts that enable crypto traders to convert one digital asset for another with all transactions viewable on the blockchain. DEX: What’s the Difference?Ĭentralized exchanges (CEX), like Binance, are online trading platforms that match buyers and sellers via an orderbook. In this guide, we explore the differences between the two and what risks you need to be aware of when trading on each of these exchanges. There are two types of exchanges in the crypto markets: centralized (CEX) and decentralized exchanges (DEX). Learn about the differences between trading crypto on a centralized and a decentralized exchange.
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