DEX and CEX: Which exchange should you choose for buying and selling cryptocurrencies?

When starting to trade cryptocurrencies, the first question many people ask is whether to use a DEX or CEX exchange. Both types of platforms serve the purpose of digital asset trading, but operate on completely different principles. This article will help you understand the differences, advantages and disadvantages of each, as well as introduce the leading exchanges today.

DEX (Decentralized Exchange) What is?

Decentralized Exchange (DEX) is a platform that allows users to trade cryptocurrencies without providing personal information or depositing funds into the platform. Instead of depositing funds into an exchange like CEXs, traders on DEXs can swap directly from their wallets via peer-to-peer networks.

All transactions on DEXs are publicly recorded on the blockchain and operated by smart contracts. As a result, buyers and sellers do not need to find a trusted intermediary to hold assets.

Some prominent DEXs include: Uniswap, SushiSwap, PancakeSwap, dYdX, Curve Finance.

According to data from Defillama, as of early March 2024, the daily trading volume on DEXs reached $12.2 billion, accounting for 38.25% of the total trading volume across the entire system.

CEX (Centralized Exchange) How does it operate?

Centralized Exchange (CEX) is an exchange managed by a centralized organization. Users must create an account, verify their identity, and deposit funds into the platform before trading. These exchanges act as intermediaries, holding assets and executing buy/sell orders.

CEXs offer fast transaction speeds, high liquidity, support for fiat currency (fiat) trading, and provide direct customer support services.

Detailed Comparison: DEX vs CEX

(Margin Trading Operation

CEXs require you to create an account, deposit funds, and trust the platform to safeguard your assets. DEXs are completely different — you only need to connect your personal wallet, maintaining full control over your assets without depositing them onto the platform.

)Trading Mechanism

At CEXs, buy/sell orders are matched via algorithms, enabling quick trades with fixed costs. DEXs use peer-to-peer mechanisms, which are slower but more transparent.

###Privacy and Security

DEXs do not require account registration, allowing completely anonymous trading. Traders only need to connect their existing wallets; DEXs do not have access to private keys.

CEXs require compliance with KYC ###know your customer### and AML (anti-money laundering) policies, requiring you to submit documents and ID photos.

Because they store large amounts of data, CEXs become prime targets for hackers. DEXs do not hold personal information, significantly reducing the risk of breaches.

(DeFi and NFT Integration

DEXs enable deep integration with DeFi and NFT ecosystems, opening opportunities to access smart contracts and decentralized financial services )DApps###.

Key Advantages of DEX

High wallet security — You are the sole owner, with no one able to manipulate or control your assets.

Respect for privacy — No registration needed, no personal info required, transactions are fully anonymous.

Not targeted by hackers — Since they do not store accounts or personal data, DEXs are much harder to attack. Their decentralized architecture further enhances security.

Absolute transparency — No fraud, price manipulation, or government interference in transactions.

Wide token availability — Anyone can create new tokens on blockchain (for example Ethereum), leading to thousands of unique tokens on DEXs.

Access from anywhere — Trade anytime, anywhere, without restrictions.

Trade unlisted tokens — You can buy/sell newly launched tokens before they are listed on CEXs.

DEX Disadvantages

Limited liquidity — Due to peer-to-peer architecture, DEXs cannot match the liquidity of large CEXs.

High price volatility — Low liquidity can lead to higher slippage, meaning you might buy/sell at less favorable prices.

Complex interface for beginners — Lacking risk management features like automatic take-profit/stop-loss, limit orders, or margin trading.

Slow access speed — On-chain mechanisms require waiting for confirmations from nodes, causing delays.

Variable gas fees — During network congestion, gas fees can spike, increasing transaction costs.

Project scam risks — Since anyone can create tokens, high caution is needed with scam projects.

Top 5 Leading DEXs

( 1. Uniswap Website: uniswap.org

The largest DEX globally, holding over 4% of the DeFi market share. Created by Ethereum developer Hayden Adams in 2018, Uniswap allows swapping ETH with other ERC-20 tokens. You can also provide liquidity to earn fees.

Advantages:

• Transactions take about 1 minute, no account needed
• 0.3% trading fee — among the lowest on DEXs
• Easy to find new tokens, capitalize on price movements

Disadvantages:

• Limited interface, no support for auto take-profit/stop-loss
• No order support if transactions are delayed
• High risk with new scam projects

) 2. PancakeSwap Website: pancakeswap.finance

A DEX on Binance Smart Chain, capturing 2.8% of DeFi market share. Uses AMM (Automated Market Making) to automate trading via Liquidity Pools.

Advantages:

• 0.2% trading fee — the lowest among DEXs
• Ultra-fast, about 5 seconds per trade
• Offers Yield Farming, Lottery, Analytics features

Disadvantages:

• Built on BSC ###centralized###, more vulnerable to hacking
• Lower trading volume than Uniswap
• Higher risk of scam tokens
• Converting ERC-20 to BEP-20 can be costly

( 3. dYdX Website: dydx.trade

Decentralized derivatives exchange built on Ethereum Layer 2 )StarkWare(, with 2.7% of DeFi market share. Launched in May 2021, supports margin trading, spot, and futures.

Advantages:

• Low fees, no gas costs
• Leverage up to 25x on BTC, ETH, LINK, UNI, AAVE pairs
• Instant trading, blockchain confirmation within hours
• Supports lending and borrowing

Disadvantages:

• Still a young project, only about 7% of tokens are in circulation outside the market

) 4. SushiSwap Website: sushi.com

Ethereum-based DEX launched in 2020, quickly becoming one of the most popular DEX platforms.

Advantages:

• Liquidity Mining: liquidity providers rewarded with SUSHI
• Fully transparent on Ethereum blockchain
• Uses AMM model suitable for users

Disadvantages:

• Risks similar to any new project
• Strong competition from other DEXs

5. Curve Finance

Website: curve.finance

Specializes in stablecoin swaps, launched in August 2020 on Ethereum, optimized for stablecoins like USDT, USDC, DAI.

Advantages:

• Low slippage for stablecoin trades (USDT, USDC, DAI)
• Good performance, low transaction costs

Disadvantages:

• Only supports stablecoins, cannot swap other tokens
• Limited scope of use

Top 5 Trusted CEXs

1. Binance

The largest CEX globally, founded in 2017. Supports thousands of trading pairs, extremely high liquidity, competitive fees. However, withdrawal fees are relatively high.

2. Huobi

A leading global CEX, established in 2018 in China. High liquidity, good security, supports Vietnamese language. Previously suspected of data manipulation.

( 3. MEXC A major CEX, processing about 1.4 million orders daily, founded in 2018 in Singapore. Supports Spot, Futures, Vietnamese language. Slightly complex interface for beginners.

) 4. Bittrex U.S.-based CEX, supports over 200 trading pairs, user-friendly interface, very fast, simple withdrawals. Disadvantages: no fiat support, higher fees ###0.25% vs Binance 0.1%###.

5. Coinbase Exchange

Top CEX, founded in 2012 in the U.S., operating in over 30 countries. High liquidity, good security, but very high trading fees ###up to 4%(, slow withdrawals, no support for Vietnam market.

How to Choose Between DEX and CEX?

Choose CEX if:

• Trading major listed coins )Bitcoin, Ethereum, ADA, XRP###
• Want to trade with fiat currency (USD, local currency)
• Need take-profit/stop-loss orders, margin trading
• Concerned about scam tokens, prefer platform regulation
• Prefer fast trading with high liquidity

Choose DEX if:

• Want to trade unlisted new tokens
• Prioritize absolute security and privacy
• Not afraid of new token risks
• Looking for low costs, don’t mind liquidity
• Interested in DeFi, NFT, Web3 ecosystem

Frequently Asked Questions

Which wallets are compatible with DEX? MetaMask, Binance Chain Wallet, SafePal, Trust Wallet — check each platform’s requirements.

Can DEX replace CEX? Both have their advantages. DEXs will continue to develop, but CEXs are still necessary for fiat trading, scam token management, and direct support. Complete replacement is unlikely.

What are DEX fees? Typically 0.2-0.3%, depending on the platform. This is among the lowest rates available today.

Do DEXs support fiat trading? No. DEXs only swap cryptocurrencies. To use fiat, you must go through a CEX.

What are the risks of trading on DEX? Research the token developer profiles carefully before buying. Be cautious of scams, fraud, and slippage issues.

Conclusion

Before investing, thoroughly research the project and tokens you choose. If you are a beginner, start with top 10 major coins like Bitcoin, Ethereum, BNB, Cardano, Polkadot to avoid unnecessary risks of losing money or wallet hacks. Consider your trading needs to decide whether DEX or CEX is the most suitable option.