Key Differences Between a CEX and a DEX

Last Modified:
March 1, 2024

A centralized exchange, or CEX, is an exchange managed by a third party such as a bank or financial institution. A CEX uses order books to match buyers with sellers willing to trade fiat-to-crypto, crypto-to-fiat, or crypto-to-crypto, at a certain price. 

Meanwhile, a decentralized exchange, or DEX, is used for peer-to-peer trading without a third party to manage and provide funds. DEXes do not hold custody of user assets. Instead, trades are settled through smart contracts called automatic market makers. Unlike CEXes, DEXes give users complete control over their crypto while transacting through the platform.

Here are some other differences between the two:

User Interface

In general, centralized exchanges have more user-friendly interfaces than decentralized exchanges. They also typically offer a more comprehensive range of tools, features, and staking options, as well as more integrations with other apps and payment gateways. The user interface of DEXes can be quite complex and require more technical knowledge to understand. They can be more intimidating for beginners, who will find CEXes easier to navigate.

Security

Because CEXes hold funds in a centralized system, they are generally more prone to hacking attacks than DEXes. On the other hand, CEXes are usually subject to more regulation than DEXes, which adds to their level of security.

Liquidity

Since they’re backed by huge financial institutions and are usually used by more buyers and sellers, CEXes typically have higher liquidity and offer more trading pairs than DEXes. Trades taking place on DEXes are also more prone to slippage, or sudden token price changes while executing a trade because of low liquidity. 

To enhance the user experience, several DEXes are attempting to address these issues. An example of a decentralized crypto and derivatives exchange offering a good user interface, security, and liquidity is KTX.Finance

KTX users can enjoy low trading fees, high liquidity, minimal spread, instant staking and unstaking, and up to 100x leverage. Designed for easy integration with any DeFi protocol, it allows users to earn yield regardless of market conditions.

KTX offers advanced risk management tools, transparent risk indicators, easy leverage trading adjustment, and exciting rewards. It lets users conduct spot swaps within the KLP pool without experiencing slippage.

By prioritizing the user experience, KTX.Finance and similar DEXes not only enhance the trading experience for seasoned traders but also lower the entry barrier for new users. Overall, they help make crypto trading simpler and more profitable for everyone.