How CEX and DEX Work, Advantages and Differences
The world of cryptocurrency is closely related to centralized exchanges and decentralized exchanges. The exchange has an important role in crypto transactions, which is a place for crypto exchanges. However, there are often mistakes in understanding the difference between the two. In this article, we will discuss the differences between a centralized exchange (CEX) and a decentralized exchange (DEX). So you can choose which one is more suitable for your needs.
What is Centralized Exchange (CEX)
A centralized exchange is a place for trading or exchange of cryptocurrencies that is regulated by a centralized company or organization. Exchanges can be made of both fiat-crypto and crypto-crypto currencies.
The nature of CEX is centralized, so there is a company or organization that acts as a third person to regulate the ecosystem in it. Centralized exchanges are already popular among the common people. Examples of CEX are such as LBANK, Binance, Tokocrypto, etc.
What is Decentralized Exchange (DEX)
Decentralized Exchange is an evolution of centralized exchange which takes the concept of decentralization by utilizing blockchain technology. A DEX is a decentralized peer-to-peer (P2P) trading platform or exchange, which directly connects buyers and sellers of crypto assets.
The decentralized DEX platform is non-custodial, i.e. users are in control of their own private keys when transacting. DEX uses self-operating smart contracts to facilitate crypto trading and log each transaction to the blockchain. Examples of DEX are PancakeSwap, SOLANA, etc.
Difference between CEX and DEX
The significant difference between the two trading places is in the approach used. CEX involves third parties, namely certain companies or organizations to arrange exchanges, store assets, and charge gas fees for transactions.
Meanwhile, DEX relies on smart contracts for each transaction. So that it does not require a third party as an intermediary to be responsible for crypto asset ownership and private key management.
Why DEX Is Superior
Although CEX is currently more popular, there are several advantages of DEX that are still rarely discussed. Here are the reasons why DEX is the right choice for you.
Privacy guaranteed safe
One of the reasons why many people prefer DEX is that transactions do not require to Know Your Customer (KYC) processes. This does not mean that your assets are not secure, instead, DEX allows you to have complete control without relying on third parties to maintain privacy.
No need to be afraid of lost assets
Are you worried about your assets being attacked by hackers? Calm! It won’t cost you any assets because DEX is built through blockchain nodes. Where blockchain nodes function to ensure network security and integrity. So you don’t have to worry about your assets being taken away.
Why are transaction fees on DEX lower than on CEX? Because in DEX there are no intermediaries or third parties. So that no matter how expensive the cost of trading on DEX, it will not be more expensive than the cost of CEX. this is made possible by the same gas fee structure as Ethereum.
After knowing the difference between CEX and DEX, are you ready to start investing in crypto assets? Litedex provides interesting features such as staking, swapping, and farming. Litedex also has crypto tokens already available on CEX (LBANK) and DEX (PancakeSwap). You can Know Every Particular Object about our tokens and projects through our official website and social media on Instagram, Twitter, and Tiktok. We also share important info with our community on Telegram.