Centralized VS Decentralized Exchanges: Which One is The Future of Crypto Transactions

How is trading cryptocurrencies different from trading any other assets like fiat currency, stocks, or bonds? There are quite a few distinctions, but the main difference is that cryptocurrencies have their own trading exchanges, which are either centralized or decentralized.

In recent years, cryptocurrencies have grown in popularity and adoption. This is because they offer super cheap borderless ways of sending and receiving money and new investment opportunities. Additionally, many people migrate to cryptocurrencies as stores of value to protect their wealth from individual and collective government inflation.

This guide offers a detailed comparison between centralized and decentralized exchanges and attempts to show why the future might lean more towards further adopting decentralized exchanges.

Centralized Exchanges (CEXs)

Cryptocurrency exchanges enable people to buy or sell fiat for crypto or vice versa and exchange one crypto for another. Today, more than 90% of all crypto trading activity takes place on centralized exchanges. They have the largest share by market capital and offer more liquidity than decentralized exchanges, making them more popular.

  • Secondary Wallets

Users usually have to create an account with a particular exchange, which acts as an escrow service to oversee a transaction on both sides. They also require that you transfer your crypto from a personal cryptocurrency wallet to your account’s wallet. 

Similarly, if you buy crypto with fiat, the exchange holds your new crypto inside the account’s wallet. It is usually easier and convenient if you’re looking to start trading but otherwise advisable to transfer your funds to a personal cryptocurrency wallet, which is much safer and secure and can only be accessed by you.

The good thing about such exchanges is that they are fast, offer a wide range of cryptocurrency and fiat pairs, and cheap transaction fees. They also offer various trading tools, simple interfaces, and various methods to buy crypto using fiat, making them flexible and highly convenient.

Some of the best-centralized exchanges include Coinbase, Binance, Kraken, BitMEX, Shapeshift, and Poloniex.

  • Centralized Exchanges Risks

Centralized exchanges are third-party services providers that enable traders to buy and sell fiat or crypto using various compatible trading pairs. However, this goes against the very essence of crypto technology, which is decentralization, eliminating third-party services, and the accompanying financial shift and influence. 

Their centralized structure presents some risks, one of them being susceptibility to hacking. Dozens of centralized exchanges have been hacked in the past decade, where the perpetrators have managed to get away with cryptocurrencies worth hundreds of millions.  

Some crypto experts have been advocating for “Not Your Keys, Not Your Crypto” or Not your Keys, Not Your Bitcoin” to show the dangers of centralized exchanges. Apart from hacking, if an exchange were to shut down immediately, that would cause anyone with crypto held up inside the exchange to lose their money. Several exchanges in the past have also done this, causing losses to millions of investors.

Decentralized Exchanges (DEXs)

Decentralized exchanges carry the true spirit of Decentralized Finance (DeFi). They are decentralized trading platforms that automate the whole buy and sell process using smart contracts. 

Users trade directly from their wallets on a distributed ledger network and eliminate the single point of failure present in centralized exchanges. 

Decentralized exchanges have been around as long as centralized ones, but they have been less popular and slower in development for various reasons. Various concepts of DEXs have used different approaches over the years, but they all have two things in common. 

First, they eliminate the need for users to hand over their funds to a third party, and they trade crypto-to-crypto. That means, for now, people would still need centralized exchanges to trade crypto with fiat.

  • Atomic Swaps

Another unique thing about DEXs is the possibility of real-time (on-chain) Atomic Swaps, which means users can transfer cryptocurrencies across different blockchain ecosystems. This is because even though blockchain networks are decentralized, they are still stand-alone software that cannot simultaneously be interoperable with others, for now.

Several DEXs have been built on the Ethereum blockchain ecosystem, the biggest smart contract developer platform today. One of the oldest DEX on Ethereum is EtherDelta, which lets users trade Ether (ETH) tokens and Ethereum-based (ERC-20) tokens.

Another popular DEX that is more of a hybrid exchange is IDEX, which lists almost 400 coins and has substantial liquidity. Hybrid exchanges try to minimize the power of centralized exchanges by introducing decentralized governance while maintaining the convenience of CEXs.

Verdict: DEXs is the Future of Crypto Exchanges

Trace Meyer is an avid Bitcoin investor, founder of Bitcoin Knowledge podcast, and the face of Proof of Keys website has been advocating for private bitcoin ownership. On Jan 3rd, 2020, in commemoration of when the first Bitcoin block was mined, he urged bitcoin owners to withdraw their funds from exchanges, which he claimed held 1.925+M BTC.

Meyer continues to promote the core principle of cryptocurrency technology, which is decentralized governance, meaning that transactions move wallet to wallet without a middle man’s involvement.

DEXs are trying to do this, but their interfaces can be a little intimidating to beginner-level users since they require substantial knowledge of how crypto networks function; otherwise, it’d be easy to lose money.

Much development is currently underway, especially with advancements in smart contract technology, which will enhance scalability and more use cases. Crypto information and interest is also growing first, and more people will start appreciating the power that comes with being their own banks.


Centralized exchanges are actually playing a critical role in crypto adoption. Still, as more people use them and leave their funds on them, they threaten the whole doctrine of the decentralized concept of cryptocurrencies.

Bitcoin live price
price change

 On the other hand, DEXs offer their wallet-to-wallet trading advantages, but they are not as popular and easy to use as centralized exchanges. Technological advancements and the existence of hybrid exchanges will introduce ways for users to keep ownership of their funds and still have the ease and convenience of transactions.

Stay up to date with our latest articles

More posts

Smart Contract Security – Pitfalls and Solutions

Smart contracts are becoming increasingly prevalent as the world moves towards a more digital and automated future. Still, they are far from being the panacea of all technological ills. Smart contracts are self-executing contracts with a predetermined set of rules. They are stored on the blockchain and run by computers, which makes them tamper-proof and reliable. However, as with any new technology, smart contracts have associated risks. This article will explore some of the most common pitfalls and how to…

Looking for Crypto Marketing? Here are The Best Crypto Advertising Agencies in 2023

It is vital to have a strong marketing strategy if you wish to succeed in cryptocurrency. This is where crypto marketing agencies come in. You may successfully promote your project and reach your target audience through a crypto marketing agency.  This article will explore the top crypto marketing agencies in 2023. Moreover, we will look at their services and how to choose the right one for your project.  We will also discuss the benefits of using a crypto marketing agency.…

The Risks of Investing in Crypto Projects without Smart Contract Audit

Smart contracts are self-executing contracts that run on blockchain technology. They are stored and verified on the blockchain, which means they are transparent and cannot be tampered with. This makes them a secure way to conduct transactions without needing a third party.  Despite their many advantages, some risks exist with using smart contracts. One such risk is investing in crypto projects that have yet to have their smart contracts audited by a qualified auditor.  Without an audit, it cannot be…

SuperBots Trading in DEX – The Future of DeFi Trading is Here

Trading in decentralized finance is evolving rapidly and empowering people worldwide to access new forms of income. Spearheading this revolution are platforms like SuperBots, a BSC-based protocol enabling users to deposit their capital in vaults for secure and efficient trades on decentralized markets. SuperBots accelerates the mainstream adoption of DeFi trading through high-performance bots that automatically trade for their owners. This way, users can achieve profitable trades, regardless of their experience or skill. Furthermore, the platform does not charge any…

Top Smart Contract Audit and KYC Companies in 2023

It's no secret that business is undergoing fast change. Companies must adapt when new technologies, like smart contracts, emerge to remain competitive. A crucial part of this adaptation process is ensuring compliance with regulations and safety. This is where a company's KYC (Know Your Customer) process or smart contract audit come into play.  To ensure that your company is compliant, working with a reputable smart contract auditor or KYC provider is essential. This blog article discusses the benefits of using…

Automated Trading with No Subscription Fees – How UpBots is Revolutionizing the Trading Industry

Cryptocurrency trading has enhanced the universe of assets available to traders worldwide. However, this practice is challenging for inexperienced or unskilled traders. Furthermore, the ongoing bear market makes trading costly and inconvenient when most platforms charge upfront or subscription fees. As a result, many people avoid entering the market. UpBots aims to change that and take the trading industry to a new level through innovative and affordable solutions. For one, its automated trading service allows users to trade in CEX…

Top 5 KYC Solutions for Crypto or NFT Projects

As the importance of blockchain technology grows, many people look for ways to get involved in the crypto world. One of the most important aspects of any cryptocurrency or blockchain project is KYC/AML.  Without proper KYC/AML procedures, your project could be at risk for fraud and illegal activities. This article will discuss the types of KYC solutions available and how to choose the right one for your project.  We will also provide tips on how to implement these solutions properly.…

DeFi Scams – Most Common Scams in the DeFi Space

In the world of Defi, scams are unfortunately all too common. This article looks at popular Defi scams, how they operate, and how to protect yourself. We'll also provide tips on what to do if somebody scammed you and how to report a scammer. Finally, we'll discuss the implications of DeFi scamming and present examples of successful prosecutions. What Are DeFi Scams, and How Do They Work? Decentralized Finance (DeFi) is a term that has gained enormous popularity over the…

5 Trading Bots Platforms to Automate Your Crypto Trading in 2023

Crypto trading bots enable investors to automate buying and selling based on advanced technical indicators. These innovative tools compete to provide the highest percentage of profitable trades even during bear markets when trading winnings are at a minimum. Therefore, it’s no surprise they have become the favorite cryptocurrency trading solutions for beginner and expert traders alike. As a new trader, you can use trading bots to emulate the successful strategies of more experienced traders. Alternatively, if you possess the know-how…

NFT Scams – Most Common Scams in the NFT Space

As the popularity of NFTs (non-fungible tokens) continues to grow, so does the potential for scams.  This article examines popular NFT scams and offers suggestions for avoiding them. We'll also discuss the future of NFT scam prevention and how to report one. A Closer Look Into NFTs and Their Popularity The past year has seen a surge in the popularity of non-fungible tokens. These digital assets are unique, and nobody can replicate them, making them ideal for collectors and investors.…