Cryptocurrency exchanges are digital marketplaces where users can buy, sell, and trade cryptocurrencies. Сhoosing the right cryptocurrency exchange depends on your individual needs and preferences. It's important to do your research and consider
factors such as security, fees, liquidity, and regulatory compliance before making a decision. There are various types of cryptocurrency exchanges, each with its unique features and benefits.
Centralized cryptocurrency exchanges (CEX)
The first category, centralized cryptocurrency exchanges, includes online platforms where you can trade both cryptocurrency and traditional fiat money.
A centralized cryptocurrency exchange works like a state or private bank. A client who wants to make a transaction, for example, buy Ether or Bitcoin, entrusts their finances to the chosen cryptocurrency platform.
Centralized cryptocurrency exchanges are abbreviated as CEX.
Before starting to work with a centralized cryptocurrency exchange, each potential user must go through a mandatory registration procedure and then a complex verification procedure.
Each client has a special digital key-password to their cryptocurrency storage section. Even in case of loss of the electronic key-password, their data can be restored thanks to a special intermediary of the cryptocurrency exchange, who will help restore the lost key.
Status centralized cryptocurrency exchanges are as safe as the banks we are used to. But many fraudulent attacks have also been recorded against such platforms, the goal of which is to steal cryptocurrency.
Decentralized cryptocurrency exchanges (DEX)
Decentralized cryptocurrency exchanges operate differently. There is no single or group of leaders in decentralized crypto exchanges.
The fact that there is no one in control of the exchange is exactly what indicates that the exchange is not subject to any directives from the center. This is a decentralized platform.
All blockchain nodes that make up the exchange network operate on the basis of a smart contract. The process of buying, selling, or exchanging cryptocurrency happens here without any control from the main server.
Each DEX can differ in blockchain architecture or may be linked to working with certain or various cryptocurrencies.
On decentralized cryptocurrency exchanges, it is also possible to buy, sell, or exchange not only different architecture tokens such as Bitcoin or more complex Ether, but also make transactions with fiat money.
To use the service of decentralized cryptocurrency exchanges, it is necessary to register on the exchange and then go through the identity verification procedure.
If you evaluate cryptocurrency exchanges based on security level, then the crypto assets of DEX clients are more secure than the financial assets of centralized crypto exchanges' users.
The main reason for the security of DEX is the decentralized architecture of the blockchain. Nevertheless, a client of a decentralized cryptocurrency platform must also undergo a complex authentication procedure.
This is done in the interest of the client themselves in order to create a more complex mechanism for protecting the user's financial assets and protect them from various fraudulent actions.