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Centralized and Decentralized Exchanges - What's the difference?

Binance Research (Stefan Piech)


  • One of the key defining features of centralized exchanges (CEX) is that they are custodial. Consequently, when you want to trade on a CEX, you keep your funds in a wallet tied to the exchange itself instead of in your own wallet. Not managing your own private keys can significantly reduce the risk of being hacked, as well as offer potentially superior security exposure. However, while safely managing your private keys is one of the most significant concerns for crypto holders, trust in the exchange becomes imperative. In this report, we’re diving into the key characteristics of centralized exchanges, their advantages, and their drawbacks

  • While Decentralized Exchanges have been around since 2012, utilizing hashed time-locked contracts (“HTLCs”), it wasn’t until the start and growth of Ethereum that they took off. To get a better understanding of decentralized exchanges, we will look at order book DEXs and automated market makers, while also covering their advantages and disadvantages

  • To help enhance understanding, we compare centralized and decentralized exchanges. The most important thing is no matter whether you opt for a centralized or decentralized exchange, you must “do your own research"

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