Learning how to use decentralized tools can be one of the major challenges for crypto newbies while using DEXs. When you make mistakes, cryptocurrency wallets, addresses, gas costs, and other blockchain-related features can be harsh. A CEX focuses on giving all types of users a https://www.xcritical.in/ user-friendly experience. While experienced traders can use the TradingView tools provided by the Spot Exchange, beginners to cryptocurrency can use straightforward converting tools. All trades on DEXs happen on the blockchain and smart contracts are the most common methods.
- Most people invest in crypto on a centralized exchange, and that may be the more accessible and safer option for average users.
- Katie has been writing about tech-based topics for two years, with a specific interest in cybersecurity, AI, and cryptocurrency.
- The difference is that centralized exchanges can offer much higher rates than a bank.
- For example, on Gemini, you can get up to 8.05% on your crypto, blowing banks out of the water.
- Centralized exchanges also give you access to customer support services.
- He has a background in both finance and technology and holds professional qualifications in Information technology.
Their extensive array of options is a boon for users who seek to diversify their investment portfolios. As a conclusion, below is a TLDR overview of the main differences between centralized and decentralized exchanges. If you look at the landscape of centralized exchanges, you'll notice that users in many countries have very few options to choose from. Even Coinbase, for example, as one of the leading exchanges in the world, doesn't have much of a presence in Latin America, Africa, or Asia as of July 2021. While there are other CEXs available in these regions, it's clear to see how difficult getting the proper licenses in various jurisdictions can be.
Centralized Vs Decentralized Cryptocurrency Exchange: A Comparison
No matter if you’re looking for a centralized exchange or a decentralized one, here are some of the things you should consider when choosing where to get your preferred digital asset. In the past, low liquidity has always been mentioned as one of the biggest downsides of decentralized services. Nowadays, however, that is not the case — most DEXs provide liquidity to their users without any constraints. In fact, a common scam is when someone claims to be from customer support and then tricks people into sharing their crypto wallet details, which allows the fraudster to steal the funds. You also might not have any recourse if someone hacks the DEX, or if you use the DEX to buy a crypto that turns out to be a scam.
New aggregator protocols like 1inch have emerged specifically to help larger investors avoid liquidity problems when using DEXs. 1inch raised $12 million in 2020 in a funding round led by Pantera Capital. As of 2021, there are over 4,000 unique cryptocurrencies on the market. In the next sections, we’ll discuss each one of these kinds of exchanges in detail.