The difference between a CEX and a DEX in crypto

CEX stands for centralized cryptocurrency exchange, while DEX stands for decentralized cryptocurrency exchange. The key difference between the two is the degree of centralization of their operations.

A centralized exchange (CEX) is run by a centralized entity, which holds custody of users’ funds and facilitates trades on its platform. These exchanges often have a large user base and high trading volumes, but they are vulnerable to hacking and other security breaches. Users of a centralized exchange typically have to undergo a KYC (Know Your Customer) process to verify their identities.

On the other hand, a decentralized exchange (DEX) is a peer-to-peer exchange that operates on a decentralized network. It allows users to trade cryptocurrencies without the need for a central authority or intermediary to hold their funds. Instead, users hold their own private keys and control their funds through a smart contract on the blockchain. Decentralized exchanges are generally considered to be more secure and resistant to hacking attempts than centralized exchanges, but they often have lower liquidity and trading volumes.

In summary, while both CEX and DEX serve the same purpose of facilitating cryptocurrency trades, CEXs rely on a centralized authority to hold and manage funds and verify users, while DEXs operate in a decentralized, peer-to-peer network without the need for intermediaries.