What is the difference between CEX and DEX?
Centralised Exchanges (CEX)
Centralised Exchanges are mainstream corporations that offer crypto trading services. As part of their offerings, you can create an account to transfer fiat currency from your bank and purchase crypto assets listed in their portfolio. The largest and the most well-known CEXs are Binance and Coinbase. With all CEX accounts, the organisation manages the custody of your assets.
They are the ideal platforms to start your crypto journey until you are ready to take more control of your assets and manage the custody of your assets. This will also allow you to access to DEXs and other types of DeFi (Decentralised Finance) offerings;
Decentralised Exchanges (DEX)
With the evolution of the crypto market, ecosystems like Ethereum created opportunities for projects to offer various p2p-based financial services. As a result, the DeFi term was born. With it, there are now (will be more) multiple options out there to invest. One of the most popular DeFi offerings is DEX, where you can trade tokens in these platforms and exchange them for a different type of token with the same token standards (belonging to a specific ecosystem). Maybe in the future cross-chain, DEXs could also be available as well.
For example, with DEX on the Ethereum blockchain, you can trade your MATIC token with COMP token (both ETH20 standard tokens) in a DEX platform like Uniswap. These exchange platforms are established by token holders contributing their tokens to respective liquidity pools and receiving rewards. The mechanics of liquidity pool contribution and rewards vary case by case. Search Google: ‘Liquidity pool’.
To exchange in DEX platforms, you will need a non-custodial wallet and an intermediate wallet like MetaMask (for Ethereum chain), some ETH in your wallet to pay gas fees and ERC20 tokens to change. Please do your research.
