EXCHANGE | April 12, 2022

Decentralized Vs Centralized Exchange

Decentralized Vs Centralized Exchange

Trading a cryptocurrency needs a cryptocurrency exchange. And what is a cryptocurrency exchange? A place where an individual can buy and sell cryptocurrencies. It is digital currency exchange, trade that permits customers to trade digital cryptocurrencies for other assets, for example a fiat currency and other cryptocurrencies. Then comes the two cryptocurrencies exchange i,e. Centralized and Decentralized.

In simple terms Centralized exchanges are the one having an owner, who manages it, and has a team. Whereas Decentralized exchanges, we can only manage our funds independently. Eg. trust wallet. Points listed below play an important role when it comes to Decentralized vs Centralized exchanges.

  • Funds control
  • Security
  • UI feature/interface
  • Support center
  • Privacy
  • Trading Volume
  • Buy/Sell currencies
  • Trader Identity
  • Trading Fee
  • Censorship

Centralized exchanges (CEX)

Centralized exchanges are the corporations that work side by side with cryptocurrency trading on a wide ranging scale, using a similar enterprise model to traditional asset exchanges such as stock exchanges.

Centralized exchanges have high volume and are traded in huge quantities. You can buy cryptocurrencies with this exchange. There are third party monitors and it secures the transaction on behalf of the user. In centralized exchange deals can’t be tracked by the blockchain system. Users need to provide personal information prior use, for verification, like personal or organizational corporate info. Here users get higher withdrawal quota along with technical customer support, if stuck in any technical issue.

Pros of Centralized Exchanges

  • Have an order book, through which you can buy or sell your crypto currencies.
  • Trade can be carried out using countries fiat currency. eg.Wazirx
  • Can do margin trading, future trading, stop loss can be sent, can place limit orders and many more.
  • Ease of use, have a simple interface, the UI system is quite manageable.
  • Forgot password? The account can be recovered with the help of customer support.
  • Personal support - Help center-gives user advance support from the operating personnel, issues and errors can be solved.
  • Have high trade volume, with high liquidity, double trading, fiat to crypto exchanges.
  • Have options of credit card, debit, b2b trading.

Cons of Centralized Exchanges

  • Have a KYC system - Need to go through the documentation process, carrying out the sharing of personal information before use.
  • Hacking, the biggest threat - exchanges can get hacked effortlessly. Not immune to hacking.
  • Limited privacy and security - Lack of privacy, the owner can misuse the account. Your money is in control of the authority. Threat to data, can get leaked.
  • Data is stored in the server, no anonymity, fear of getting banned as with a country's fiat currency.
  • Trading fee on every transaction/trade i.e. buying and selling.

Decentralized exchanges

Decentralized exchanges are cryptocurrency exchanges, allowing direct p2p cryptocurrency trade, to occur online safely without any need of a mediator.

Pros of Decentralized Exchanges

  • No need for documentation.
  • Are highly secured, no fear of information leaking.
  • We are the owners, and have a private key.
  • Funds can’t get misused.
  • No personal details needed, or sharing of data, no data required for verification.
  • Smart contracts can be used to buy another currency.
  • Highly Secure- Difficult or impossible to hack.
  • Anonymity - Anonymous trading, just connect wallet.
  • No trading fee, or less.
  • No third party intervention permits peer to peer exchanges.
  • For long term goal trading, it is the best platform.

Cons of Decentralized Exchanges

  • Limited trading.
  • Less capital being provided for trading.
  • Lack efficiency of fast services compared to centralized.
  • High gas fee.
  • No basic feature of personal support, less convenience in help support centers.
  • Low trade volume.
  • Limited to crypto to crypto exchanges.
  • Liquidity provider fee and low liquidity.
  • Interfaces are difficult to use.

What to go for Centralized or Decentralized

Below distinguished points will give a more clear overview.
Points Centralized Crypto Exchange Decentralized Crypto Exchange
Security Lacks security measures, threat to hack Highly Secured, nearly impossible to hack
Reputation Accepted almost everywhere Still making its place
Features Offers wide range of attributes Have less features to offer
Liquidity High Low
Speed Execution of orders are swiftly done Takes longer for execution of orders
Regulation Follow obedience. Requires licensing from authority Less ease in regulation. No licensing required by any authority
Control Platform or corporation have control Control of exchanges are in hand of user
Fees Fees on every transaction Minimal to no fee

Beginners should go for centralized currency exchanges due to ease of use. Experts will go for decentralized funds, funds can be stored safely in decentralized exchanges. Think before investing the money over both platforms. Choose the one you find convenient.

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People Comments

Mark Robbinvt

June 19, 2019

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Jack William

June 19, 2019

Couldn’t agree more Mark. It’s a must read for someone looking to understand the whole process.


Mark Robbin

June 19, 2019

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