What is a CEX exchange?

Centralized exchanges (CEX, Centralized Exchange) typically refer to digital asset trading platforms operated by companies or organizations, whose main function is to act as a trading intermediary to match buyers and sellers, providing an efficient and secure trading environment. On CEX platforms, users can register accounts, deposit funds, and buy and sell cryptocurrencies through the platform’s order book, using a centralized management model to offer users a more convenient trading experience, a wider range of trading pairs, and a variety of advanced trading tools such as margin trading, contract trading, options trading, etc.

CEX centralized trading operation diagram (image source:https://www.addevice.io/blog/cryptocurrency-exchange-development)

In short, CEX ensures market liquidity and maintains stable trading depth through centralized matching mechanisms, allowing users to complete transactions in a way closer to market prices. However, the centralized management model of centralized exchanges also brings certain potential risks, as user funds are stored in exchange wallets, CEX faces security threats such as hacker attacks and internal management vulnerabilities.

However, due to the fact that CEX relies on centralized servers for trade matching, there is also a higher risk of single point of failure. If the exchange is not operated properly, user funds may be affected. Therefore, some investors are more inclined towards decentralized trading in order to gain greater control over their assets.

What is a DEX exchange?

Decentralized exchanges (DEX) rely on blockchain technology and smart contracts for trading matching. Unlike centralized exchanges that require users to trust central authorities to custody assets, DEX provides users with a peer-to-peer environment, allowing them to have full control over their assets. It offers a way to access and exchange a wide range of digital assets without the need for customer identity verification (KYC).

Compared to centralized exchanges (CEX), decentralized exchanges (DEX) offer greater transparency and asset security. However, they also face challenges such as a more complex trading experience, relatively lower liquidity, and transaction speeds affected by blockchain network conditions. Despite these hurdles, the continuous growth of the DeFi ecosystem has highlighted the strong potential of DEXs in enabling permissionless trading and reducing centralized risks, marking a paradigm shift in cryptocurrency trading.

Decentralized exchange operational diagram (Image source:https://www.addevice.io/blog/cryptocurrency-exchange-development)

CEX vs. DEX respective advantages

The main advantages of CEX

1. Adequate liquidity
   Centralized exchanges (CEX) typically have deep trading liquidity, helping users to execute trades more quickly and with lower slippage, ensuring buy or sell orders are completed near market prices. In addition, high liquidity also helps maintain market stability and reduce the impact of extreme price fluctuations.

2. Convenient user experience
   CEX exchanges typically offer an intuitive and easy-to-use interface, allowing users to complete operations such as deposits, trading, and withdrawals without the need for complex blockchain knowledge. They also provide a synchronized trading experience between mobile and web versions, making them suitable for novice investors entering the cryptocurrency market.

3. Advanced Trading Function
   Compared to decentralized exchanges, CEXs typically offer a wider range of trading tools and strategy support, such as providing trailing stop loss, Fill or Kill (immediate execution or cancel) and other order execution strategies to meet the needs of professional traders. In addition, CEXs also provide copy trading, grid trading, and other intelligent trading tools, allowing users to automatically execute strategies based on market fluctuations, thereby improving trading efficiency.

List of Top Centralized Exchanges (Image Source:CoinGecko, 2025.3.15）

Main Advantages of DEX

1. Decentralized Trading
   DEX exchanges do not rely on a single entity or central authority for management. All transactions are executed directly on the blockchain and matched automatically by smart contracts, eliminating reliance on centralized institutions. This also effectively reduces the risk of manipulation or closure of the platform, enhancing the transparency of transactions.
2. User control assets
   In a DEX exchange, users always control their private keys and assets, and directly trade through non-custodial wallets, avoiding the risk of asset loss due to exchange failure, hacker attacks, or poor internal management, achieving complete asset sovereignty.
3. More trading options available
   DEX is more open in listing new assets, allowing users to freely trade various emerging tokens, such as small tokens not yet listed on CEX, making DEX a popular platform for early investors to discover potential projects and attracting users seeking more trading opportunities.

Top decentralized exchanges list (Image source: CoinGecko, 2025.3.15）

CEX vs. DEX Risk Comparison

CEX exchanges use centralized custody, and users need to deposit funds into the wallet provided by the platform for trading. Although this model improves trading efficiency, it also means that CEX becomes a major target for hacker attacks. For example, according to CoinDesk statistics, there were at least 6 CEX theft incidents in 2018, resulting in a total of $860 million in user asset losses. In addition, some CEX exchanges also face potential risks such as poor internal management and platform running away, leading to greater uncertainty for user funds, so choosing an exchange with a higher reputation is particularly important.

In contrast, DEXs adopt a decentralized custody model, where user assets remain in personal wallet addresses, inherently preventing large-scale losses from exchange hacks. However, this does not mean DEXs are entirely secure, as hackers can still exploit phishing sites, scams, and other fraudulent methods to target individual users. Ultimately, the security of a DEX depends largely on users’ awareness and their understanding of crypto asset protection.

In terms of security, DEX exchanges have a greater advantage as users’ assets are always stored in personal wallets. However, since DEX trading mainly relies on automated market makers (AMM) or on-chain order books, there may be situations of liquidity depletion during market volatility. Therefore, finding the best balance between decentralized security and trading efficiency is also a key factor in the future development of DEX.

CEX or DEX?

1. Trading Demand
   If a user’s trading needs focus on high liquidity, quick execution, and the use of advanced trading tools (such as leverage, contract trading, automated trading, etc.), then CEX may be a better choice. On the contrary, if a user is more concerned about decentralization, privacy protection, and is willing to accept lower liquidity and relatively slower transaction speeds, then they may prefer to trade on DEX exchanges.

2. Risk Tolerance
   CEX centralized custody of user assets is more likely to face potential risks of hacker attacks or regulatory intervention. If users are highly sensitive to asset security, prefer to control private keys themselves, and hope to avoid the risks that centralized platforms may bring, DEX is a more suitable choice.

3. Privacy needs
   DEX does not require KYC (identity verification), all transactions are automatically executed by smart contracts, providing higher privacy protection. If users value asset autonomy, decentralized trading, and stronger privacy during the transaction process, they can choose DEX trading.

4. User Experience
   CEX usually provides an intuitive and user-friendly interface, with a simple and smooth trading process, suitable for novice investors and users seeking a convenient trading experience. In contrast, DEX operations are more complex, and users need to master knowledge such as wallet management, smart contract interaction, and blockchain trading mechanisms. For non-technical users, there may be a certain usage threshold, and users can choose according to their own level of understanding of blockchain.

Conclusion

With the rise of decentralized finance (DeFi), the DEX trading method is gradually attracting market attention, each with its own unique advantages suitable for different types of investors. Generally speaking, CEX is suitable for users pursuing efficient trading, abundant liquidity, and convenient experience, while DEX is more suitable for investors focusing on decentralized asset management, privacy protection, and a wide range of token trading opportunities. Currently, the technology and liquidity of DEX platforms are still being continuously optimized, although it is still difficult to completely replace the advantages of CEX in high-frequency trading and user experience. In short, when choosing an exchange, investors should allocate assets reasonably based on the market environment, their own trading needs, and risk preferences to maximize investment security and returns.