Centralized and decentralized exchanges — what to choose?

14 March 2023
Centralized and decentralized exchanges — what to choose?

Disputes between supporters of decentralized and centralized exchanges have not subsided since their inception. Each party will surely find arguments in favor of “their” exchange, while a large part of experienced crypto investors enjoys all the advantages of centralized and decentralized platforms.

Let's figure out what is the difference between these platforms, as well as which one is better for cryptocurrency investors.

Centralized exchanges

Centralized Exchange (CEX) — это биржи, работа которых централизована. За все обменные операции и связанное с ними обслуживание платформы, а также за безопасность средств инвесторов отвечает администрация биржи. Упрощённо схема работы выглядит так:

A scheme of work

  1. Users register on the exchange.
  2. They replenish the account - they transfer cryptocurrency to internal exchange wallets that are linked to the user account.
  3. They conduct intra-exchange transactions with the payment of a commission to the exchange.
  4. After the completion of all transactions, they withdraw the cryptocurrency to their wallet.

While the funds are stored in the wallets of the centralized exchange, they do not actually belong to the user. They will be fully transferred to his disposal only after being withdrawn to an external cryptocurrency wallet. The most popular centralized exchanges are Binance, Coinbase, Kraken.

Decentralized exchanges

Decentralized Exchange (DEX) are exchanges without centralized management. They work on the basis of distributed ledger technology and smart contracts.

A scheme of work:

  1. The user enters the exchange, then creates an order for the exchange of cryptocurrency.
  2. Another user responds to the order.
  3. A smart contract is created, during the execution of which cryptocurrencies are exchanged on the wallets of participants.

The main difference between decentralized exchanges is that all transactions are carried out directly from cryptocurrency wallets, and only their public addresses are stored inside the platforms. Popular decentralized exchanges are Uniswap, Curve Finance and SushiSwap.

What to choose?

Traditionally, CEX have great functionality: the presence of trading functions, exchange for fiat currencies, the ability to add almost any cryptocurrency assets to the listing. But they are not anonymous, they set transaction limits for unverified traders, they charge a commission for all transactions.

DEX are anonymous, leave users' wallets under their complete control, and are better protected from account hacking. But not as functional as CEX

Centralized exchanges are suitable for earning on the active trading of cryptocurrencies, while decentralized exchange platforms make it possible to quickly and cost-effectively exchange one cryptocurrency for another.

The AKRA token interacts correctly with centralized and decentralized exchanges. Users can perform bi-directional exchanges for other cryptocurrencies or fiat on CEX and directly exchange tokens with users on decentralized exchange platforms through smart contracts.

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