What’s the difference between a CEX and a DEX?

CEXs and DEXs are both platforms that help buyers and sellers trade. While a CEX is operated by a single entity, a DEX is run permissionlessly through smart contracts on a blockchain. An entity or project may help set up and maintain a DEX, but it can run itself as long as people provide liquidity. Unlike CEXs, to use a DEX only requires a crypto wallet and some cryptoassets. Due to its decentralized nature, there's no registration or account required.

CEXs can offer customer support and a more user-friendly experience; however, they are susceptible to attack, take higher transaction fees from users, their solvency is opaque which leads to the last and most important weakness, they require users to relinquish custody of their funds. The last point proved to be disastrous for many people who put their trust in CEXs which went insolvent in 2022.

In contrast, DEXs offer custody of funds, data protection and privacy, and lower barriers to entry, but can currently be more complex to use and lack fiat on and off ramps.