CEX vs DEX: Centralised and Decentralised Crypto Exchanges

Centralized vs Decentralized Exchanges

Centralised exchanges hold your funds and match orders; decentralised exchanges trade from your wallet via smart contracts. Compare costs, safety and how each works.

Beginner3 min readUpdated 3 Oct 2026

Lesson 6 of 24

Crypto trades on two very different kinds of venues. Centralised exchanges (CEXs) work like traditional brokers: you deposit funds, the exchange holds them and matches your orders in its own order book. Decentralised exchanges (DEXs) run on smart contracts: you trade directly from your own wallet, and the blockchain settles each trade. Each has strengths and risks, and many traders use both. Choosing the right venue affects costs, safety, access to tokens and how your orders are filled.

Side by side#

Feature	Centralised exchange (CEX)	Decentralised exchange (DEX)
Custody	Exchange holds your assets	You keep your keys
Account	Sign up, identity checks	Connect a wallet
Matching	Central limit order book	Automated market maker pools or on chain order books
Speed	Very fast	Limited by blockchain speed
Fees	Trading fees, sometimes low	Swap fees plus network gas fees
Token selection	Listed tokens only	Almost any token
Leverage	Often available	Some perpetual DEXs offer it
Main risks	Exchange failure, hacks, frozen withdrawals	Smart contract bugs, scams, MEV
Examples	Coinbase, Kraken, Binance	Uniswap, Curve, Hyperliquid

How DEXs price trades: automated market makers#

Many DEXs use automated market makers (AMMs). Instead of an order book, liquidity providers deposit two tokens into a pool, and a formula sets prices. Uniswap's classic design keeps the product of the two token amounts constant:

x × y = k

Liquidity providers earn swap fees but face impermanent loss: if prices move a lot, they end up worse off than if they had simply held the two tokens. See DeFi Basics.

Risks on centralised exchanges#

Exchange failure: FTX collapsed in November 2022 after customer funds were misused; customers waited years for partial recoveries.
Hacks: Mt. Gox lost about 850,000 bitcoins in 2014; Bybit lost about $1.5 billion in ETH to hackers in February 2025.
Frozen withdrawals during stress.
Regulatory actions in some countries.

Proof of reserves reports help, but they do not always show liabilities fully. See Market, Credit and Counterparty Risk.

Risks on decentralised exchanges#

Smart contract bugs and exploits. See Bridge and Smart Contract Risk.
Scam tokens and rug pulls: anyone can create a token and a pool.
MEV and sandwich attacks: bots can front run your trade. See MEV.
Slippage in thin pools.
Gas costs on busy networks. See Mempools and Gas.
Wallet security: a malicious approval can drain your wallet.

Practical tips#

Do not keep more on exchanges than you need for trading.
Use well established venues with strong security records.
On DEXs, set slippage limits and check the token contract address.
Revoke unused token approvals in your wallet.
Compare total costs: spreads, fees, gas and price impact.

Frequently asked questions#

What is the difference between a CEX and a DEX?#

A CEX holds your funds and matches orders centrally; a DEX lets you trade directly from your wallet through smart contracts.

Are DEXs safer than centralised exchanges?#

They remove the risk of an exchange losing your funds, but add smart contract, scam and MEV risks. Neither is risk free.

What is an automated market maker?#

A smart contract that holds pools of tokens and sets prices with a formula, allowing trades without a traditional order book.

Next, learn the practicalities of buying and selling crypto in Crypto Spot Trading.

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Next lessonCrypto Spot TradingSpot trading means buying and selling actual crypto at current prices. Learn order types, pairs, fees, sizing, custody and how spot differs from derivatives.