Centralized vs Decentralized exchanges: Pros and cons
The world of digital currencies cannot be imagined without exchange platforms, where the volume of exchange transactions exceeds a $100 billion daily. And this is without taking derivatives into account 💰
Today there are over 300 exchanges on the market, which can be divided into 2 types:
1️⃣ Centralized Exchange (CEX)
CEX is an exchange that is managed from a single center. Control over exchange operations, security of funds, service is the responsibility of the exchange administration.
Examples of CEX: Binance, Coinbase, Kraken, etc.
- Fiat access
- Extensive trading functionality
- No access to private keys
- Security risk
- Price manipulation (bots, etc.)
- KYC (identity verification procedure)
❗️ When you keep funds on the exchange, they become the property of the exchange until you withdraw them to your wallet.
2️⃣ Decentralized Exchange (DEX)
DEX is a decentralized platform built on distributed ledger technology and powered by smart contracts.
DEX examples: Uniswap, Curve Finance, SushiSwap
- Private keys in the hands of the owner
- Ability to quickly add coins for exchange
- No KYC
- Nobody can block your account
- Limited set of functions (pending)
- Liquidity is lower than on CEX (Uniswap solves this problem with a liquidity ratio of $4.39 billion)
- Difficulty for beginners compared to CEX
- Fiat is not supported
The FORSAGE community encourages partners to be wary of centralized exchanges. And the statistics confirm this: hackers stole $300.1 million at the rate of 2020 from exchanges last year ❌
If you have any questions about the operation, reputation or security of exchanges, then don’t hesitate to ask the FORSAGE support service 👊🏻
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