Cryptocurrency can be traded through centralized exchanges (CEXs) or decentralized exchanges (DEXs), and the two models differ meaningfully in how they operate.
Centralized exchanges
A centralized exchange operates similarly to a traditional brokerage: the platform holds custody of user funds, matches orders, and typically offers a more familiar user experience, along with customer support.
Decentralized exchanges
A decentralized exchange facilitates peer-to-peer trading directly from users' own wallets via smart contracts, without a central party holding custody of funds.
Trade-offs to consider
- Custody: centralized platforms hold funds on your behalf; decentralized platforms typically do not.
- Regulation and support: centralized exchanges are more likely to offer traditional customer support and operate under specific regulatory frameworks, which vary by jurisdiction.
- Complexity: decentralized exchanges often require more technical familiarity to use safely.
