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<h2 id="header-0">Quick Take</h2><ul><li>Centralized exchanges (CEXs) usually enable faster transactions and lower fees. But they verify the user’s identity and fall under regulations and laws.</li><li>Decentralized exchanges (DEXs) are less user-friendly but tend to be more privacy-forwarded.</li><li>DEXs trading volume makes up only 8% of total volume compared to the top 3 CEXs.</li><li>The on-chain transaction volume of DEXs from April 2021 to April 2022 was $49 billion higher than that of CEXs.</li></ul><h2 id="header-1">CEXs in a nutshell</h2><p>In fact, a centralized exchange is like a huge marketplace matching sellers and buyers. It’s governed by a single authority. CEX has a crypto <a href="https://www.investopedia.com/terms/o/order-book.asp" rel="noopener noreferrer nofollow">order book</a> — a list of validated orders for various assets. Its volume is higher compared to a decentralized exchange due to faster transactions (if you buy/sell at market price). CEXs enable better speed because they <a href="https://medium.com/hackernoon/cex-vs-dex-which-crypto-exchange-model-is-best-1dfcf80f4221" rel="noopener noreferrer nofollow">don’t update</a> the nodes in real time.</p><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/906e2eee95574edb8a6e2fb8c599d40b.png" /></p><h3 id="why-choose-a-cex">✅ Why choose a CEX?</h3><ul><li>Most often, it’s more user-friendly and easier to understand for newbies.</li><li>It offers higher liquidity. It means it’s easy to buy/sell/swap, etc. your crypto at any time.</li><li>It provides more transactions per second.</li><li>Exchange fiat for crypto is available.</li><li>CEXs have more features for more experienced users, such as derivatives trading, margin lending, etc.</li><li>As a rule, CEXs have lower fees.</li></ul><h3 id="what-are-the-major-downsides-of-centralized-exchanges">❌ What are the major downsides of centralized exchanges?</h3><ul><li>CEXs are custodial. They hold your assets, so you don’t own them. A CEX can be hacked, fall under sanction, or decide to suspend your account.</li><li>CEXs are subject to regulatory requirements and laws, including sanctions, AML, etc. These requirements may change in no time. For example, the US Congress required exchanges to <a href="https://art-wallet.medium.com/crypto-news-not-to-miss-out-8e5b90d4f725" rel="noopener noreferrer nofollow">report on combating fraud</a>. The EU Parliament has signed its long-awaited Markets in Crypto Assets Regulation (MiCA), which is expected to come into effect in 2024.</li><li>You’ll have to go through KYC procedures, i.e., verify your identity. In case of a hacker attack, your sensitive data can be leaked.</li><li>CEXs have higher fees <a href="https://d.docs.live.net/767456bf78f07734/%D0%A0%D0%B0%D0%B1%D0%BE%D1%87%D0%B8%D0%B9%20%D1%81%D1%82%D0%BE%D0%BB/%E2%80%A2%09https:/www.coindesk.com/business/2021/02/04/what-is-uniswap-a-complete-beginners-guide/" rel="noopener noreferrer nofollow">for listing new coins</a>.</li></ul><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/4361ab5366d147afad7005553d0cd209.png" /></p><h2 id="header-2"><br />DEXs explained</h2><p>You can define DEX as the opposite of CEX. Decentralized exchanges appeared as an alternative to centralized ones so as to lower fees and let users truly own their crypto. DEXs don’t store data on internal servers. They use decentralized server networks instead. It means hackers can’t attack a central server since it doesn’t exist. DEX’s users have full control over their private keys and funds.</p><p>Decentralized exchanges are powered by an <a href="https://www.coindesk.com/learn/2021/08/20/what-is-an-automated-market-maker/" rel="noopener noreferrer nofollow">automated market maker protocol</a> (AMM). To put it simply, it allows traders to add liquidity, getting rid of custodial infrastructures, and reward liquidity providers. Token prices on decentralized exchanges are determined by an algorithm.</p><h3 id="why-choose-a-dex">✅ Why choose a DEX?</h3><ul><li>There are more trading pairs on DEXs because anyone can list a token and provide liquidity for it (beware of scam projects!)</li><li>You truly own your crypto as a decentralized exchange doesn’t store your private keys ➡️ it can’t withdraw your assets because it’s not responsible for them.</li><li>Decentralized exchange is more privacy-forwarded, as it doesn’t hold your private key and funds.</li><li>DEXs are exchanges without KYC. So, there’s no data for a breach.</li><li>There are no regulatory problems. But there’s no guarantee that watchdogs won’t try to set up rules for DEXs as well.</li><li>There’s no middleman between a buyer and a seller because self-executed smart contracts process transactions.</li><li>Users get rewards for providing liquidity. For example, <a href="https://docs.uniswap.org/protocol/concepts/V3-overview/fees" rel="noopener noreferrer nofollow">Uniswap v3</a> has 0.05%, 0.30%, and 1% fee levels (and more may be added).</li></ul><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/b36102fc450042afb350127e8d3e9618.png" /></p><h3 id="what-are-the-major-downsides-of-decentralized-exchanges">❌ What are the major downsides of decentralized exchanges?</h3><ul><li>Using DEXs might be complicated for novices as their interface is harder to navigate through.</li><li>You can’t exchange fiat for crypto and vice versa.</li><li>Lower liquidity.</li><li>You are not immune from <a href="https://cointelegraph.com/explained/what-is-impermanent-loss-and-how-to-avoid-it" rel="noopener noreferrer nofollow">impermanent loss</a> when there’s a fluctuation in the price ratio of pooled pairs. Using stablecoin pairs mitigates the risk.</li><li>There’re many unvetted coins on DEXs, so the number of scams and shady schemes is higher.</li><li>DEXs are hacked more often because protocols are less secure. The <a href="https://decrypt.co/102300/cosmos-based-defi-exchange-osmosis-hit-by-5m-exploit" rel="noopener noreferrer nofollow">Osmosis hack</a> for $5 million in June is the latest example.</li><li>Transaction speed may be lower as all transactions happen on-chain and may take time to be validated.</li></ul><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/28a64f1f4d7240bf86c79032125d6f95.png" /></p><h2 id="header-3"></h2><h2 id="header-4">Which exchanges are more popular?</h2><p>One of the latest <a href="https://blog.kaiko.com/crypto-markets-recover-despite-9-1-inflation-9d7db87ab83f" rel="noopener noreferrer nofollow">Kaiko researches</a> shows that Uniswap caught up with Coinbase in trading volumes. In seven months, Uniswap’s share soared from 27% to almost 50%. The shift comes as:</p><ul><li>Ethereum fees lowered.</li><li>DEXs provide more liquidity for stablecoin swaps.</li></ul><blockquote><em>Stablecoin pools have the highest total value locked across DEXs. Their stablecoin trade volumes are comparable to that of CEXs.</em></blockquote><p><em>Kaiko</em></p><p>Sounds like a great trend, right? However, the full picture is completely different. Compared to the top 3 CEXs, DEXs make up only 8% of total volume. Moreover, Binance is a monopolist in its category. So is Uniswap V3, which accounts for up to 90% of daily trading volume on Ethereum.</p><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/fbdeeffdb1e945f9a421bd89b916b9f4.png" /></p><h2 id="header-5"></h2><h2 id="header-6">Who will win the centralized exchange vs decentralized exchange battle?</h2><p>We can’t say for sure. According to <a href="https://blog.chainalysis.com/reports/defi-dexs-web3/" rel="noopener noreferrer nofollow">Chainalysis</a>, DEXs’ on-chain transaction volume ($224 billion) was higher than that of CEXs’ ($175 billion) in April 2021 – April 2022.</p><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/68fd60c0bbe94fbaa7b17552192827a7.png" /><em>Source: Chainalysis</em></p><p><strong>Experts say DEXs may stay leaders if they</strong></p><ul><li>Have fair prices and lower commissions.</li><li>Manage to convince users that a non-custodial approach is better.</li><li>Allow for scaling.</li><li>Bypass regulatory hurdles. (That’s why centralized ShapeShift <a href="https://www.coindesk.com/business/2021/01/06/shapeshift-is-going-full-defi-to-lose-kyc-rules/" rel="noopener noreferrer nofollow">decided to become a DEX</a>).</li></ul><h2 id="header-7">So, which one is right for me?</h2><p>It depends. As we mentioned before, CEXs are easier as the first step into the crypto space. DEXs seem more complicated but provide more privacy as they’re non-custodial. So, weigh the pros and cons and decide which one is the best for you.</p><p><img src="https://academy-public.coinmarketcap.com/optimized-uploads/b2cfad68e00541c4befb18d787178ae5.png" /></p><p>Anyway, we suggest that you <a href="https://oneart.digital/en/blog/crypto-wallets-vs-crypto-exchanges-which-is-better" rel="noopener noreferrer nofollow">don’t store your assets within an exchange account</a> and move it to a <a href="https://oneart.digital/en/blog/crypto-wallets-for-beginners" rel="noopener noreferrer nofollow">crypto wallet</a>. They’re more secure and user-friendly, have useful prompts for newbies, and provide more options to manage your assets, especially<a href="https://art-wallet.medium.com/what-nft-is-really-about-6405e8995fb8" rel="noopener noreferrer nofollow"> NFTs</a>. For instance, you’ll be able to create custom collections and AirPlay your non-fungible tokens in the <a href="https://oneart.digital/en" rel="noopener noreferrer nofollow">OneArt app</a>.</p><p>To choose the best wallet, read our <a href="https://oneart.digital/en/blog/which-crypto-wallet-is-the-best" rel="noopener noreferrer nofollow">article</a>. But bear in mind that the market still doesn’t offer a solution to meet all user’s needs. OneArt is working to solve the problem and bring you an all-in-one wallet — secure, user-friendly, and fun. Keep in touch so as not to miss our <a href="https://oneart.digital/en/blog/tag/development-updates" rel="noopener noreferrer nofollow">updates</a> and <a href="https://oneart.digital/en/blog/tag/news" rel="noopener noreferrer nofollow">news</a>!</p><h2 id="header-8">Follow official OneArt channels to find the latest info and updates:</h2><ul><li><a href="https://twitter.com/art_wallet" rel="noopener noreferrer nofollow">Twitter</a></li><li><a href="https://t.me/art_wallet" rel="noopener noreferrer nofollow">Telegram Group</a></li><li><a href="https://t.me/artwallet_official" rel="noopener noreferrer nofollow">Telegram Announcements</a></li><li><a href="https://coinmarketcap.com/community/profile/OneArt" rel="noopener noreferrer nofollow">CoinMarketCap Community</a></li><li><a href="https://www.linkedin.com/company/oneart/" rel="noopener noreferrer nofollow">LinkedIn</a></li></ul>

DEXs vs CEXs. Which to Choose?

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