DEX or CEX exchanges? When you have to make a transaction or an exchange of cryptocurrencies; you can encounter many obstacles and it is not operational or reliable. Unless it is with someone you trust the most, doing it person to person, face to face.
This explains the need for exchange platforms
Within these there are two groups, Decentralised Exchanges (DEX) and Centralised Exchanges (CEX).
Let’s take a closer look at the main characteristics that differentiate one from the other.
Features of a DEX
- You can trade assets without the funds leaving your wallet. They are only out for the few seconds that the transaction lasts.
- Exchanges are done through smart contracts.
- No registration is required. You only need to connect your wallet to the DEX.
- No need to share your private keys.
- Fees are usually between 0.2% and 0.3% per transaction.
- There are no limits or intermediaries, you do not require validation for the use of your assets, as your assets do not leave your wallet, so you have control over them at all times.
- You cannot trade in fiat money.
- There are starting to be possibilities to use tools that allow you to place programmable orders.
Characteristics of a CEX
- Management is through a company.
- Transactions in fiat currency will be allowed.
- Entries will be in the database most of the time until withdrawal or withdrawal of funds occurs or even later.
- Use of Know Your Customer (KYC) and Anti-Money Laundering (AML).
- Commissions are usually cheaper than DEX, around 0.1%. But then you have to pay fees for withdrawals and deposits.
- You are subject to limitations on deposits and withdrawals according to the regulations and policies of each CEX / Country.
- They tend to have more pairs and more liquidity.
- They are subject to hacking and losing your funds in most cases if this happens. Since the custody of your assets is in the hands of the company that manages the CEX. If this company were to go bankrupt, it could also mean the loss of some or all of your assets.
- They have a wider range of programmable orders and leverage options.
Which exchange is the best choice between DEX and CEX?
Obviously each type of platform has its advantages and disadvantages, although it is true that for traders it seems even better to use the CEX as they have greater liquidity, lower commissions and more tools and variety of pairs. The trend in DEX is clearly towards the inclusion of those features that make CEX attractive to traders, while maintaining the benefits they offer in terms of asset control and privacy.
As we can see from JamonSwap, DEXs are already incorporating the ability to use programmable orders, which is a small step.
The ability to leverage trades and the ability to exchange assets from different networks are milestones that are already close to becoming a reality; in part, in the case of JamonSwap thanks to Chainlink‘s Cross Chain Interoperability Protocol (CCIP) that is about to be released.
It is also planned to use smart contracts to offer “Copy Trading” services. Basically, users interested in trying their luck with trading, but who are not yet experienced enough, will be able to use this service so that by depositing funds in a smart contract (not in the hands of any third party), they can copy the trades of their favourite trader automatically.
In addition, to ensure that trades are made at the best cost, the contract will search for the DEX, from the pre-selected DEX, with the best liquidity in the pairs of each exchange that is programmed.