In this article:
Learn the difference between the two most common types of exchanges in crypto trading.
In cryptocurrency trading, two main types of exchanges dominate the market: decentralised exchanges (DEXs) and centralised exchanges (CEXs).
Both types offer distinct approaches to buying, selling, and swapping digital assets, each with its own set of benefits and drawbacks.
If you're looking to use your Best Wallet on an exchange, it's important to know the differences and risks associated with both centralised and decentralised exchanges.
What are Decentralised Exchanges (DEXs)?
Decentralised exchanges, commonly know just as DEXs, are platforms that facilitate peer-to-peer trading of cryptocurrencies without the need for intermediaries or centralised control. The Best DEX is a great example of an easy-to-use decentralised exchange.
DEXs operate on blockchain technology and use smart contracts to enable trustless and permissionless trading. Key features include:
Decentralisation: DEXs operate on a distributed network, enhancing their resilience and making them resistant to censorship or interference. This means you often can trade crypto anonymously and quickly.
Non-Custodial: Users maintain control over their funds, reducing the risk of exchange hacks. This means you all you have to do is connect your Best Wallet to the DEX, trade normally, and then disconnect your wallet. You're in full ownership of your crypto at every stage.
Transparency: All transactions are recorded on the blockchain, and therefore visible to anyone. You can use blockchain explorers like Etherscan to track all your transactions publicly.
Privacy: DEXs typically do not require personal information from their users. All you have to do is connect your Best Wallet.
Global Access: They are accessible from anywhere in the world, promoting financial inclusivity.
Disadvantages of DEXs
There are disadvantages to using DEXs, especially for first-time users:
Complexity: DEXs are often less user-friendly, especially for beginners. Whilst some are easy to use, like Best DEX, they do require a level of knowledge on how to connect your wallet, and so on.
Liquidity: Often lower than CEXs, leading to potential price slippage. This depends on which DEX you use, and is less of a problem when trading larger cryptocurrencies like Tether (USDT), Ethereum (ETH), Bitcoin (BTC) and so on.
Speed: Transactions can be slower due to blockchain confirmation times. This again depends and often DEXs are quicker in processing swaps and transactions, as there are no middlemen or centralised entities.
Customer Support: Typically limited or non-existent. This is because DEXs aren't strictly managed by a centralised organisation, but rather just hosted, much like a physical marketplace.
What are Centralised Exchanges (CEXs)?
Centralised exchanges operate similarly to traditional stock exchanges.
They act as intermediaries between buyers and sellers, providing a platform for users to trade cryptocurrencies. Two of the most famous and widely used CEXs are Binance and Coinbase. Notable features of CEXs include:
Ease of Use: CEXs often provide user-friendly interfaces, making them more accessible to beginners.
Liquidity: Due to their large user base, CEXs typically offer high liquidity, meaning large volumes of trades can be executed quickly and at stable prices. This means you can get truer exchange rates between cryptocurrencies.
Customer Support: They usually offer customer support services to assist users with any issues.
Regulation: Many CEXs comply with regulatory standards, which can offer a sense of security for users. Crypto regulations, including tax implications, change quickly and depend on your geographical location, and CEXs have to keep up-to-date on those changes.
Disadvantages of CEXs
Despite their benefits, there are also significant downsides to using CEXs:
Security Risks: CEXs are more vulnerable to hacks due to centralised control. This could be either your personal data, your crypto funds kept on the centralised exchange, or a wallet's private keys/secret recovery phrase.
Privacy Concerns: CEXs often require personal information for identity verification, including extensive KYCs, to use their platforms. This is often counterintuitive to users who own crypto for its privacy and anonymity.
Censorship: Subject to regulatory pressures and potential asset freezes. This happens when a country might change its crypto stance and therefore halt CEXs from operating in that location.
Accessibility: May not be available in all countries due to regulations. Again, this is a downside of centralisation.
Best Wallet's integrated access to 200+ DEXs
Best Wallet has seamlessly integrated with Rubic, meaning you have access to over 200 DEXs when swapping your crypto in-app.
What this means is you have the advantages of DEXs with the user-friendly experience of a CEX. Features include:
Automatic Integration: Users of the Best Wallet app are instantly connected to 100s of major DEXs, with no additional setup required, making it easy and accessible to use.
Ease of Use: Best Wallet offers a straightforward interface, making decentralised trading more accessible.
Security and Control: Users trade directly from their wallets, retaining full control over their funds. Best Wallet or any DEX can't access your crypto without your permission, and you maintain full control of your wallet's private key.
No Registration Needed: Swapping crypto in-app stays true to the decentralised ethos, requiring no know-your-customer (KYC) checks and ensuring user privacy. The same goes for Best Wallet - there is no KYC process to receive, swap, or hold crypto.
Wrapping up
The choice between using a DEX or a CEX depends on your preferences and crypto needs. Both decentralised exchanges and centralised exchanges offer unique advantages and disadvantages for cryptocurrency traders.
However, Best Wallet offers the best of both DEXs and CEXs, offering seamless, easy-to-use decentralised swaps.