Centralized exchanges and DEXs: what is the difference?
Updated: 5 days ago
When buying or trading cryptocurrency, two abbreviations appear frequently: CEX and DEX. Both can be used to exchange digital assets, but their structure and the responsibilities placed on the user are different.
What is a CEX?
A centralized exchange is a platform operated by a company. It typically creates an account for the user, manages the trading infrastructure, and may hold cryptocurrency deposited on the platform.
What is a DEX?
A decentralized exchange generally allows users to trade through smart contracts by connecting a wallet directly. The user maintains greater control over their keys, but also takes on more operational responsibility.
The most important difference: custody
With a CEX, custody is often entrusted to an intermediary. With a DEX, the user generally interacts with the protocol from their own wallet. This can reduce some forms of counterparty risk, but it introduces different risks, including wallet mistakes, malicious tokens, smart-contract vulnerabilities, and transaction errors.
The Crypto Mentor view
There is no perfect solution for everyone. The right choice starts with understanding who controls the funds, what protections exist, and which responsibilities remain with the user. Understanding how the system works matters more than how quickly you can open an account.
Further reading: hardware wallets and security
If you want to explore hardware wallets further, Crypto Mentor has prepared a dedicated guide to Trezor Safe 7. Self-custody can increase your control over funds, but it also increases your responsibility for PINs, backups, recovery words, and device security.
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