Centralised and decentralised exchanges: what is the difference?

Cryptocurrencies are traded on two kinds of venues. They solve the same problem — matching buyers and sellers — in very different ways.

Centralised exchanges (CEX)

A centralised exchange is a company that runs a trading platform. You deposit funds to the exchange, and it keeps them in its own wallets. Trades happen inside the exchange's database: an order book collects buy and sell orders, and a matching engine pairs them.

• Strengths: fast trading, deep liquidity on popular pairs, fiat deposits, customer support, password recovery.
• Weaknesses: you trust the company with your funds, accounts can be restricted, and an exchange failure or hack can affect all its users.

XFasil shows live market data from one of the largest centralised exchanges.

Decentralised exchanges (DEX)

A decentralised exchange is a set of smart contracts on a blockchain. You connect your own wallet and swap tokens directly; the contract holds the pooled tokens, not a company. Many DEXs use automated market makers instead of order books — see DEXs, AMMs and liquidity pools.

• Strengths: you keep custody until the swap, anyone can use it, and the rules are visible in the code.
• Weaknesses: network fees, smart contract risk, scam tokens listed by anyone, and no one to call if you make a mistake.

A quick comparison

• Custody: CEX — the exchange; DEX — you, until you swap.
• Account: CEX — registration and usually identity checks; DEX — a wallet.
• Prices: CEX — order book; DEX — usually a pool formula.
• Mistakes: CEX support can sometimes help; on a DEX a signed transaction is final.

Which is "better"?

Neither is better in every case. People often use centralised exchanges for convenience and liquidity, and decentralised ones for tokens and applications that only exist on-chain. In both cases the basic rules are the same: protect your keys and passwords, check addresses and networks, and never trade more than you can afford to lose.