CEX vs DEX

There are two main ways to trade crypto: centralized exchanges (CEX) and decentralized exchanges (DEX).

Centralized Exchanges (CEX)

Examples: Coinbase, Binance, Kraken

How they work:

- Company operates the exchange

- You create an account (KYC required)

- Deposit funds to their custody

- Trade on their order book

Pros:

- Easy to use

- Fiat on/off ramps

- Customer support

- Usually faster/cheaper

Cons:

- Not your keys, not your coins

- Can freeze accounts

- Privacy concerns (KYC)

- Exchange hacks happen

Decentralized Exchanges (DEX)

Examples: Uniswap, SushiSwap, dYdX

How they work:

- Smart contracts on blockchain

- Connect your own wallet

- Trade directly peer-to-peer

- Automated Market Makers (AMM) provide liquidity

Pros:

- You control your funds

- No KYC required

- Can't freeze your account

- Access to more tokens

Cons:

- Higher fees on some chains

- Harder for beginners

- No customer support

- Smart contract risk

When to Use Each

Use CEX for: Buying first crypto with fiat, large trades, beginners

Use DEX for: Privacy, self-custody, tokens not on CEX, DeFi