DEX or CEX? Which is better?

The month of November could not have been more shocking for Crypto traders with the recent collapse of FTX. FTX is one of the top leading CEXs in the Crypto Industry. The collapse of FTX caused FUDs in the heart of Traders and Investors and It also served as an eye-opener to plenty of investors. More investors are beginning to consider DEX over CEX. But What are the things you need to know about CEX and DEX, The Cons and The pros before making a decision? I know the collapse of FTX has brought a reduction in the trust people have for CEX.

FTX Collapse

Before now, Most Crypto users or investors would go to a Centralized Exchange as their first port when trying to buy a Crypto because of its ease to use. Let’s quickly go through the pros and cons involved in using CEX and DEX.

DEX or CEX? Which is better?

What is an Exchange? A Cryptocurrency Exchange helps users to store, trade, or swap Cryptocurrencies. In the world of Cryptocurrency; There are two cryptocurrency exchanges; The CEX and The DEX.

DEX

What is DEX? DEX is a peer-to-peer platform where users can trade cryptocurrencies directly with other users without relying on any intermediaries.

DEX (Decentralized Exchange) like Uniswap or Pancakeswap offers low transaction fees and lets you directly own/hold your assets. They offer low transaction fees and They also do not require any documents or any personal details at all, unlike CEX. You only need to keep your seed phrase safe. You also do not have to fret about losing some of your coins due to regulations or rules bounding your country. With DEX you can trade directly from your wallet. In DEX You have full control of your private keys and full custody of your funds, unlike CEX where you do not have full custody of your funds. Transactions on DEX are settled directly on the blockchain.

PROS

1. No KYC/AML required — In CEX, You are required to submit any means of identification which may include any Government issued photographed-ID, proof of address, and source of funds depending on the CEX. For people who are bothered about privacy, This is not cool. For some people, some of the required documents are not available or they do not have access to it.
2. No Central Authority means No counter-party risk since your funds are in your control.
3. Centralized Exchanges have the right to suspend your account if you violate any of their terms but in DEX it is not like that.
4. Access to more tokens at the Infant stage.

CONS

1. Tokens on DEX are more susceptible to rug-pull
2. Lower Trading Volumes and Liquidity
3. Forgetting your seed phrase means your account is lost and irretrievable.

CEX

CEX(Centralized Exchange) like Binance or Kucoin require registration involving your documents, Government issued-Id, and personal details before you can have full access to all of their features. Most CEX is easy to use when it comes to trading. Most people feel more comfortable using CEX and The interface tends to be more user-friendly. CEX has higher liquidity than DEX. CEX allows users to be able to trade fiat for Cryptocurrency unlike In DEX which is exclusively Crypto for Crypto.

There is no doubt that CEX has been playing a vital role in the Cryptocurrency industry and will continue to play these vital roles. So, What are the Pros and Cons of CEX?

PROS

1. Higher trading volumes and liquidity
2. Easy to use
3. Support Fiat conversion making it easy for newbies
4. In a case where you forget your password, Your account can be easily recovered.

CONS

1. Strict KYC
2. If an exchange is under investigation, Your assets might be temporarily frozen.
3. More prone to attacks

Interested in finding a token in its infancy? DEX is your go-to plug then. They are also not very prone to hacking/attacks, unlike CEX. Although Coins on DEX are more riskier than coins on CEX. Using a Centralized Exchange means you have a high level of trust in the exchange.

Remember “Not your key, Not your token”

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