🏛️🖧 How to Choose Between Centralized & Decentralized Exchanges (CEX v DEX)

🏛️🖧 How to Choose Between Centralized & Decentralized Exchanges (CEX v DEX)

In previous blog articles, we’ve covered a broad view of cryptocurrency and decentralized finance (DeFi).

👀 In this article, we’ll take a closer look at cryptocurrency exchangesboth centralized (CEX) and decentralized (DEX) and define what they are, their different purposes and when to use each kind. Here is our brief guide to get you on a clearer path to understanding.


👉A cryptocurrency exchange is simply a place to buy and sell crypto. It doesn’t have to be an online platform, although physical, real world crypto exchanges are rare.

A crypto exchange offers different trading pairs, such as Bitcoin / US Dollar $ (BTC/USD) or Ethereum / Euro € (ETH/EUR) and countless other pairs. Trading pairs on decentralized exchanges are typically between two cryptocurrencies e.g. BTC/ETH etc. Crypto exchanges can also offer spot trading and futures.


👉 A centralized cryptocurrency exchange (CEX) is like a neighborhood bank🏦, but for cryptocurrencies. It's a centralized platform where digital assets can be bought, sold, and traded.

🔎 These exchanges are run by companies that act as intermediaries, holding a user’s funds and executing transactions on their behalf.

Examples of centralized exchanges include: Binance, Bitfinex, Coinbase, Coinbase Pro, Gemini, Huobi Global & Kraken.

CEX Advantages
✔️ Fiat Currency Support
✔️ High Liquidity & Volume
✔️ Wide Variety of Supported Assets and Instruments
✔️ User Experience and Support

CEX Disadvantages
❌ Requires Trust
❌ Single Point of Failure
❌ Lack of Transparency


👉 A decentralized cryptocurrency exchange (DEX) is like the rebel side of crypto trading! 🕶️🌐 Unlike CEXs, DEXs are the renegades of the crypto world.

🔎 These exchanges operate on the principles of decentralization, where power is distributed among the people. No middlemen, no central authority, just the user and the blockchain. 🙅‍♂️💪

Examples of decentralized exchanges include: 0x Protocol, PancakeSwap, UniSwap, SushiSwap, Curve & Venus.

DEX Advantages
✔️ Non-Custodial
✔️ Permissionless Operation via Smart Contracts📄
✔️ Transparency
✔️ Censorship Resistance

DEX Disadvantages
❌ Impermanent Loss
❌ User Experience
❌ Token Support Limited
❌ Hacks and Bugs

⚔️ CEXs v DEXs

There are several differences between CEXs and DEXs.


CEXs: currently proving to be more popular with crypto traders as they were established earlier, have user-friendly interfaces📲 and large marketing budgets with capital-backing.
DEXs: experiencing increased activity and more prevalence in exchange markets.📈


CEXs: have increased functionalities with useful features such as margin trading, portfolio management tools and various order options.
DEXs: only offer a restricted number of order types and no access to margin trading.

🔒Security / Safety

CEXs: While these follow very strict security guidelines and have security features like 2FA, user verification and customer support, they also attract malicious hackers and scammers.👥

DEXs: User funds are less at risk of being hacked on a DEX as there is no intermediary exchange.

🎯Crypto Selection

CEXs: offer access to a curated list of cryptocurrencies.

DEXs: grant access to most, if not all cryptocurrencies in existence.


CEXs: possess much higher liquidity and allow traders to conduct massive trades for the most liquid cryptocurrencies.

DEXs: often struggle to match the liquidity levels of CEXs. To address this, some DEXs have introduced Automated Market Makers (AMMs) as a new liquidity mechanism.


CEXs: usually charge commissions fees per trade and withdrawal.

DEXs: by automating most of their processes, DEXs have fewer overhead expenses and lower fees, but users also have to pay gas fees.


CEXs: trades can happen almost instantaneously due to the platform’s liquidity.

DEXs: trades happen in real-time on the blockchain, requiring up to ten minutes to match and fill.


CEXs: embrace users with little to no prior crypto knowledge and are more user-friendly.😎

DEXs: attract more experienced traders with fluency in advanced terminology.


CEXs: abide by the regulations, compliant with local regulatory bodies, maintain a KYC database and use software to make sure trades are totally free of loopholes.

DEXs: no compliance guidelines to follow.


CEXs: must abide by local and regional regulations to operate.

DEXs: governments and regulators have no influence on DEXs.

💼Custodial (CEX) vs Non-Custodial (DEX) Authority

CEXs: require custody of assets before trading. If a CEX fails (e.g., FTX in November 2022), crypto stored in the exchange wallet is at risk. Some CEXs now offer insurance for user deposits.

DEXs: With a self-custody wallet (used in DEX trading), crypto traders have full control over their funds and every transaction.


CEXs: by giving up custody, CEX users are more vulnerable to hack attacks.

DEXs: if a DEX trading pair is volatile, liquidity providers are at risk of suffering impermanent loss.


When choosing between CEX and DEX, consider your priorities🤔.

Choose a CEX if:

  • effortless on-ramp experience is important
  • easy-to-use tools are a priority
  • pre-vetted altcoins make you feel secure
  • crypto is a relatively new concept to you

Choose a DEX if you:

  • are experienced and ready to venture on your own
  • seek freedom from fees and limitations
  • understand cold storage for long-term safety
  • want to embrace the blockchain's wild side!🤪

🔮 CEX versus DEX is not a battle with a clear winner. It's a matter of personal preference. Some traders prefer CEXs🏛️, while others favor DEXs🌐. Many crypto enthusiasts use both.

CEXs serve as entry and exit points to traditional financial systems, while DEXs offer access to unique tokens. You don't have to choose sides. Use a CEX for learning and simple trades, and leverage a DEX to explore altcoins and avoid fees.

Embrace the versatility of CEXs and DEXs to enhance your crypto journey!💪💰


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The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the website's content as such. Bloom does not recommend that any cryptocurrency or NFTs should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.

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