Whenever you decide to trade crypto, you'll need to choose a DEX or a CEX for your operations. In brief, DEXs offer lower transaction fees, giving users an opportunity of holding their assets with no regulatory burdens. CEXs use a business model similar to traditional institutions, which could be more convenient for investors to understand how to manage processes within the app. Both options have pros and cons, and as it usually happens, everything depends on your personal demand.
As for us, we're going to explore the best ones of both worlds!
DEXs and CEXs Quickly Explained
Decentralized Exchanges, or DEXs, allow people to trade cryptocurrency in a non-custodial way rather than the traditional method of having financial operations through intermediaries among market participants. They focus on P2P transactions. The transactions are processed using automatic agreements written in code called smart contracts.
Platforms differ in infrastructures and system designs. Typically, crypto DEXs have liquidity pools, novel order books, and DeFi features, such as consolidation tools for unique and innovative investment products.
DEXs often replace traditional exchange order books with liquidity pools and AMMs, which pair buyers and sellers depending on order prices and volume. They are cryptocurrency pools with assets that remain under the exchange's surface, waiting to clear any buy or sell order. The funds in the pool flow from investors who deposit their money to get passive income from transaction costs payable to pool users.
As for CEXs, they are owned and ruled by a private company and, thus, ask users to sign up and open an account to use their services.
CEXs process transactions of crypto assets between buyers and sellers by providing an online trading platform with an order book: a collection of buy and sell orders posted by individual traders.
A CEX facilitates orders placed in the order book by its users and then uses special software to match and execute the corresponding buy and sell orders.
The exchange acts as a custodian for any cash and/or crypto held in your account. So, whether it's fiat or crypto, once deposited within a CEX, they are under the exchange's custody. This means that you trust the exchange to keep your funds safe the same way you'd trust a bank's vault to hold your money.
TOP 5 DEXs
Uniswap is a well-known decentralized exchange, one of the largest by volume in the decentralized finance (DeFi) sector. The Uniswap platform is a blockchain protocol based on Ethereum that uses automated market makers (AMMs) and liquidity pools to process peer-to-peer (P2P) trading. An AMM is a smart contract that runs the Uniswap pools where users keep their tokens that are used for trading. Once a trade is made, Uniswap's AMM algorithm helps set a fair price for the token based on the supply and demand dynamics between the tokens in these liquidity pools. The system relies on liquidity providers (LPs) supplying tokens to Uniswap pools. Then, they are rewarded with a fee proportional to their pool share for every transaction.
Uniswap introduced UNI, a native governance token that provides better community involvement. UNI holders vote on Uniswap project developments that influence the platform's roadmap. Besides, UNI holders can use the token to fund liquidity mining pools, grants, partnerships, and other growth-driven initiatives designed to expand Uniswap's usability and reach.
SushiSwap is Uniswap's source-code fork that implements community-oriented features such as staking rewards and governance via its SUSHI token. SushiSwap is essentially a clone of its predecessor, Uniswap, but designed to give more control to its community of users.
Uniswap released its governance token, UNI, and implemented similar community-centric features to regain some transaction volumes it initially lost to SushiSwap. SushiSwap continues to see major growth alongside its counterpart, with both platforms serving as two of the most popular DEXs available to DeFi traders.
SimpleSwap is a decentralized exchange that offers fast transactions, multiple choice of currencies, 600+, and 24/7 support that is always there for you.
As it's a DEX, the platform does not ask you to register or sign up, so you don't have to provide personal information. Traders simply do their transactions within the website or the app, entering the details of the transaction and then processing it.
Trading with SimpleSwap is an easy and straightforward process. The exchange offers a floating rate as well as a fixed rate for trading crypto assets.
SimpleSwap also has an affiliate and a loyalty program which is intended to attract more users and make the platform more convenient.
SimpleSwap has a crypto wallet based on AES encryption and can be used as a browser plugin. And as the project is quite serious and strives to develop in different areas, they have a crypto academy called SimpleLearn where users find out more about crypto and can earn some rewards.
4. The Curve
The curve is another well-known exchange and an AMM platform that offers to exchange tokens with low fees and low slippage by only accommodating liquidity pools made up of similarly behaving assets like stablecoins or wrapped versions of like assets such as wBTC and tBTC. The following approach allows Curve to use more structured algorithms and feature the lowest levels of fees, slippage, and impermanent loss of any DEX on Ethereum. The Curve model is quite conservative once compared with other platforms. First of all, it avoids volatility and speculation in favor of stability and, by doing this, provides an airbag for a deep and less fragile asset market.
In 2020, the Curve protocol launched a decentralized autonomous organization (DAO) to maintain changes to the protocol. The Curve DAO is run by the CRV token. The CRV token can be bought or earned through yield farming, which is a process of depositing assets into a liquidity pool and earning tokens as a reward.
5. The Balancer
The Balancer is an AMM empowering users to create liquidity pools with up to eight different tokens, acting as weighted index funds within the DeFi ecosystem. Balancer uses its constant mean market maker equation to rebalance assets within pools via algorithm every time a trade is made, so the whole process is automatic. Balancer crypto DEX trading fees are paid directly to liquidity providers, who can also receive multi-purpose Balancer (BAL) tokens on a weekly basis.
An index fund weighted by market capitalization invests more in certain companies than others.
The Balancer protocol owns the BAL token, which can be earned by liquidity mining, which is depositing cryptocurrencies into Balancer's liquidity pools. The more liquidity, tokens, and value you contribute to a Balancer pool, the more Balancer tokens you get.
TOP 5 CEXs
If you aren't interested in DEXs and your heart belongs to more regulated options, here are some platforms you might be interested in.
Coinbase is a trading and investing platform for crypto that offers users to buy, sell, and exchange 200+ tradable cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), and Dogecoin (DOGE). Coinbase is one of the largest companies, with over 108 million users and over $101 billion in assets.
There are options for both beginners and gurus. In 2022, the company migrated more advanced Coinbase Pro accounts to a new platform called "Advanced Trade."
The platform offers a wide selection of coin offerings, a convenient user experience, and crypto wallet options. It also has a disadvantage, as it is quite expensive, and staking commissions are rather high.
2. Crypto.com Exchange
Crypto.com offers 250+ coins, and it's a marketplace for non-fungible tokens (NFTs). The platform empowers you to earn trading fee discounts, and the security level is quite serious.
Bear in mind if you're in the U.S., you can't use the platform to the fullest, although most of the exchange's features are still available. You can use the Crypto.com mobile application instead.
Coinbase.com has its own token called CRO, and it can help you to make trading fees lower on the platform. It also offers a prepaid Visa card that serves like a rewards debit card, allowing users to spend their crypto holdings easily.
Kraken is famous for being a platform where it's easy to buy, sell, and exchange various cryptocurrencies, including market leaders Bitcoin (BTC) and Ethereum (ETH). In addition to buying and selling crypto at spot rates, Kraken offers users margin accounts and futures trading, riskier products useful for advanced trading strategies.
Kraken has a comprehensive ecosystem for starters, but more experienced traders haven't left aside and can use the lower-cost active trading platform Kraken Pro.
Binance.US has 130+ cryptos which are not great in choice but cover most cryptos an individual may be looking to trade.
Binance.US makes it possible to stake around 19 different cryptos, including Ethereum (ETH), Cardano (ADA), Polkadot (DOT), Polygon (MATIC), and Solana (SOL), advertising yields as great as 12.5% annual percentage yield (APY).
Binance.US is one of the top exchanges for staking. The platform has OTC trading and API trading.
Additionally, Binance.US has high-security rankings as well as low fees. Some Bitcoin (BTC) pairs can be traded at no fee at all. Overall, its easy-to-use platform offers an excellent option among the world's many crypto exchanges.
Bitget is a cryptocurrency exchange that has over 2 million registered users worldwide and has achieved a 24-hour transaction volume of $5.6 billion. It's also ranked #3 worldwide in terms of the daily average for future trading in terms of volume thanks to its featured product, Coin-Margin futures, which achieved an all-time high volume of trading by reaching the amount of $7.82 billion.
The Bitget platform offers low fees for both spot and derivatives trading, but its main focus is trading with derivatives. Bitget is available for traders in the USA, Canada, Australia, and Singapore.
The Bottom Line
Time shows that CEXs could be closer to the traditional format and keep your funds under their control. Still, the case is that there are many stories of data and money breaches that make investors and traders avoid intermediaries like centralized exchanges and use DEX as an alternative.
It's up to you to decide the best place to trade your crypto, but never neglect DYOR and think twice before making a choice.
If you have your favorite DEX or CEX we haven't listed, share some of those you're using with us! Drop names in the comments!