Making a decision between a centralized vs decentralized crypto exchange is an interesting topic that needs some attention. A bit of digging in to the details before being able to settle on which is going to be the right choice for you.
Hopefully you are not expecting a definitive one sentence answer of “DEX crypto exchanges are the best!”, or “you should only use a CEX crypto exchange”. If you are, it is likely you will leave disappointed.
There are many different variables that will need to be considered from an individual perspective before you can get close to an answer on whether a DEX or CEX crypto exchange is for you.
Within this article, you will find a breakdown of what a CEX, DEX, and trading platform is in relation to crypto before digging in to the best in each category and why you might want to use each one.
If you want to jump right to the main points and skip the intros, feel free to use the contents table below to do just that!
CENTRALIZED VS DECENTRALIZED TABLE OF CONTENTS
– What is a Crypto exchange?
– What is a centralized crypto exchange (CEX)?
– Pros & Cons of CEX crypto
– What is a DEX exchange (decentralized)?
– Pros & Cons of DEX crypto
– Best CEX Crypto Exchange
– Best DEX Crypto Exchange
– Centralized Vs Decentralized exchange summary
What Is A Crypto Exchange?
Put simply, a crypto exchange is what you interact with to buy, sell, or exchange cryptocurrency. It is the interface for your transactions and transfers to take place and without an exchange of some kind, you would not have a market place. No market place equals no market.
You will notice a lot of differences in crypto trading platforms from crypto exchanges but there is also the element of the centralized vs decentralized exchanges. If you are trading crypto with leverage, you will commonly want to do that with one of the recognized crypto brokers or centralized exchanges that support futures, as opposed to a pure decentralized exchange.
We have all heard of the stock market, but the market itself is made of different exchanges around the world. These various stock exchanges are where transactions are dealt with either in a physical or digital form.
With a cryptocurrency exchange, they do not have some of the same human connotations or thoughts of old trading floors with many traders shouting and closing deals in the pit. A crypto exchange is providing access to instruments and therefore the liquidity which is the lifeblood of trading.
Whether this exchange is operating in a decentralized vs centralized manner is beside the point when it comes to the main function. The function and purpose of a CEX or DEX exchange in its’ simplest form is in fact very similar, if the end motivations may diverge.
There are many factors that you may want to consider when it comes to deciding on the best crypto exchanges and we have covered those criteria in detail within the same article. If you are interested to know who we consider to be the best decentralized exchange and the best CEX crypto exchange, you can jump to those below.
What is a centralized crypto exchange (CEX)?
A centralized crypto exchange is one that is based on a central system, centralized servers and usually governance from an authority or regulator.
These centralized exchanges operate as a company which is for profit and the aim is to provide market liquidity and access for a fee which is the spread or commission charged per transaction. There is a singular order book, faster transaction speeds, and usually significantly higher volume than you will find on even the best decentralized exchange.
Operating as a for profit company with oversight from authorities means that the KYC (know your customer) requirements are higher than the decentralized exchange model. This provides some additional hoops to jump through in order to trade on a CEX, and in return, makes it more difficult for nefarious actors to hide their transactions (for whatever reason).
CEX Crypto Summary Pros & Cons
- Transaction Speed
- User Experience
- Range of Trading Types
- More Regulatory Oversight
- Longer on boarding/kyc process
- Centralized servers potentially more vulnerable
- Governance oversight can stifle innovation
What is a DEX crypto exchange (decentralized)?
A Decentralized exchange operates in almost an inverse manner to a CEX, in that decentralization is at the core of their activity. Servers and nodes are not centralized but maintained by the community and spread across the globe. There is no central government or authority responsible for a DEX, and as such they can operate in a manner that is more flexible and innovative for their counterparts.
It is common (but not guaranteed) that a DEX exchange will have a lower transactional speed, and usually lower liquidity than a CEX. This is in part because the transaction is taking place between two parties directly (buyer and seller) and not with the exchange itself.
Decentralized exchanges can still deliver similar services, with a different operational model vs centralized counterparts
The best decentralized exchanges provide a very similar set of services underneath the hood as its centralized alternative. The key difference is that the activities are handled and processed in a decentralized manner.
You will find a venue, a matching system, an AMM (automated market maker), to facilitate your transactions but the the behavior and interface is usually quite different.
Where a CEX is a for profit company, and as such will typically have a large marketing and product budget to build the user experience out in the way they deem most suited to the audience, the DEX will usually be far more lean and focused on the actual exchange functions.
You will find a lot more cross chain functionality on a DEX via what appears as a single transaction than a CEX which will often have you transacting through chains individually in a series of transactions.
The DEX exchange delivers far more anonymity, and will usually require very little user information to use. This makes it very easy to engage with, without even creating accounts there.
If you hold a software wallet such as Metamask, KEPL, etc… then you can engage directly with a DEX to transact providing you have loaded the required cryptocurrency / tokens.
Some of the more popular DEX exchanges include Uniswap, Pancakeswap, Osmosis, and Sushiswap but there are a growing number to facilitate each of the various blockchains as you can see from informational portals like Coinmarketcap.
It is worth noting that there are a few notable exchanges that operate in an almost hybrid model and blur the lines a little between centralized vs decentralized exchanges. One of the main ones being KuCoin which continues to deliver features usually only found on either/or.
You will need to have crypto already loaded into an existing crypto wallet of some kind in order to use a DEX exchange as they are more ‘crypto-to-crypto’ rather than ‘crypto-for-cash’. That means whilst you can still trade BTC to GBP, you cannot load GBP in. It is likely that throughout your journey on towards a DEX exchange, you will likely engage with a CEX or a hybrid type crypto exchange before you get there.
DEX Crypto Summary Pros & Cons
- Free from governance
- Decentralized servers
- Transaction speed
- Less flashy user interfaces
Best Decentralized Exchanges
Unfortunately, it is not possible to list just one best decentralized exchange, as the blockchain that you want to engage with will usually have its’ very own specialist operator. In this sense, we are going for bonus points by breaking out the best DEX crypto exchanges by blockchain.
KuCoin – Best All Around Decentralized/Hybrid Exchange
Osmosis – Best Decentralized Exchange For Cosmos
Pancakeswap – Best Decentralized Exchange For Binance Chain
Trader Joe – Best for Avalanche – https://traderjoexyz.com/home#/
SolarBeam – Best for Moonbeam & MoonRiver – https://solarbeam.io/
Best Centralized Crypto exchange
MINIMUM DEPOSIT : $2
COINS SUPPORTED : 100+
FEES : SPREADS 0.5%
SUMMARY : Best for beginners
With a history of more than 10 years that stretches back to 2012 and the earlier days of cryptocurrency, Coinbase is one of the largest and most established crypto exchanges in the World. As a centralized crypto exchange, users have also backed Coinbase as one of the more trusted providers with their data.
Coinbase has managed to accrue a hugely impressive 68 million clients to date and has proven to be at the leading edge of reliability throughout the past 10 years. This CEX crypto exchange has exceeded $462 billion in quarterly trading volume so from a liquidity perspective, is one of the most fluid places to get in and out of a position.
The minimum deposit with Coinbase stands at just $2, so entry into the market here is certainly accessible to global audiences and helps to complete the package that will likely make this centralized crypto exchange one that will remain competitive with users into the next 10 years.
- Minimum deposit from just $50
- Fiat to crypto trading supported
- Spreads from 0.1%
Centralized VS Decentralized Summary
If you want the shortest possible either/or answer to the centralized vs decentralized debate then our suggestion is that you will likely find a use for both. There is no clear winner for all occasions, only differing types of delivery, reporting, and service mechanisms.
For DeFI and pure crypto-to-crypto you will most likely be happier on a decentralized exchange, but at some stage you will no doubt go through one of the centralized or hybrid crypto exchanges to get to where you need to be.
There is still not universal support across any of the exchanges for all blockchains so get buckled up and ready to work your way through a few of the best crypto exchanges in both the DEC and CEX crypto world.