What is an Exchange (Centralized vs. Decentralized)?. A centralized exchange (CEX) matches orders and holds customer funds. A decentralized exchange (DEX) runs on smart contracts and lets users trade directly from their wallets.
How it works
CEXs maintain internal order books and custody. DEXs use liquidity pools or on‑chain order books; trades settle on the blockchain.
Why it matters
CEXs offer fiat ramps and customer support; DEXs offer self‑custody and transparency. Many investors use both for different needs.
Common pitfalls
- Leaving large balances on exchanges without withdrawal plans
- Trading illiquid pairs with high slippage
- Approving unlimited token allowances on DEXs
Quick example
You buy ETH with a bank card on a CEX, withdraw to your wallet, then swap tokens on a DEX where you keep custody.
See also
- Liquidity Pool
- Impermanent Loss
- KYC/AML
TL;DR: What is an Exchange (Centralized vs. Decentralized)? defined in plain English with practical next steps.
Add comment
You must be logged in to post a comment.