In the financial field, centralized exchanges and decentralized exchanges are two common trading models. They each have their own characteristics and are suitable for different scenarios and needs. This article will delve into the differences between centralized exchanges and decentralized exchanges, analyze their advantages and disadvantages, and help readers better understand these two trading models.

First, let's start with the definition and characteristics to clarify the basic concepts of centralized exchanges and decentralized exchanges. Centralized exchanges refer to all transactions being conducted on the same centralized platform, such as stock exchanges. Decentralized exchanges, on the other hand, refer to transactions being conducted on multiple nodes without a centralized institution controlling them, such as decentralized exchanges for cryptocurrencies. Next, we will compare the differences between the two exchanges in several key aspects.

In terms of trading efficiency, centralized exchanges usually have higher trading speeds and liquidity. Taking stock exchanges as an example, since all transactions are conducted on the same platform, it is easier for buyers and sellers to match, and transactions are faster and more efficient. However, decentralized exchanges may have inefficient matching due to the dispersion of trading nodes, resulting in slower trading speeds. However, decentralized exchanges can provide higher security and privacy protection to a certain extent, because transaction data is not stored in one place, reducing the risk of hacker attacks.

From the perspective of supervision and transparency, centralized exchanges are supervised by regulators, and trading rules and processes are relatively transparent. Investors can learn about the operation of exchanges through regulatory reports and public information. In contrast, decentralized exchanges are relatively weakly regulated, trading rules may not be clear enough, and there are certain risks. However, some supporters believe that decentralized exchanges are more in line with the concept of decentralization, can avoid single point failures and centralized risks, and protect the safety of user assets.

In terms of user experience and convenience, centralized exchanges usually provide more abundant trading varieties and functions, with user-friendly interfaces and convenient operations. Many centralized exchanges also provide mobile apps to facilitate investors to trade anytime and anywhere. However, decentralized exchanges may have certain deficiencies in user experience and functions due to technical limitations, and users need to have certain technical capabilities to operate. However, some users prefer the autonomy and decentralization characteristics of decentralized exchanges, believing that this is more in line with the original intention of digital currency.

In general, centralized exchanges and decentralized exchanges have their own advantages and disadvantages, and are suitable for different scenarios and user groups. Investors should weigh their own needs and risk preferences when choosing an exchange. In the future, with the continuous development of blockchain technology and financial innovation, centralized exchanges and decentralized exchanges may have more integration and innovation, bringing more choices and opportunities to investors.

When making decisions, you should choose an exchange that suits you according to your actual situation. Whether you choose a centralized exchange or a decentralized exchange, the key is to understand its characteristics and advantages and disadvantages, and do a good job of risk control and asset management, so that you can better participate in transactions and obtain benefits. I hope this article is helpful to you, and I wish you a smooth investment!

The four most famous international exchanges:

Binance INTL	OKX INTL	Gate.io INTL	Huobi INTL
China Line　APP DL	China Line　APP DL	China Line　APP DL	China Line　APP DL

Note: The above exchange logo is the official website registration link, and the text is the APP download link.

With the increasing popularity of decentralization, more and more investors are beginning to understand the importance of decentralized exchanges. We know that centralized exchanges have an unavoidable weakness, that is, its assets are controlled by the exchange, so there is always a possibility of being hacked or embezzled. Compared with decentralized exchanges, decentralized exchanges will have higher security, because the assets of decentralized exchanges are on-chain, so even if hackers attack, the security of users' assets will not be threatened and will still be in their wallets. Many investors want to know what is the difference between centralized exchanges and decentralized exchanges? Let the editor of the currency circle tell you about it.

 What is the difference between centralized exchanges and decentralized exchanges?

1. DEX advantages

The first is anonymity. Using a centralized exchange only requires a public key. At the same time, some creators of centralized exchanges claim that they only release open source software and are not responsible for the community's use of the software, thus avoiding KYC and AML issues.

The second is security. In the past 11 years, there have been too many incidents of centralized exchanges being hacked, such as Mt.Gox and. Until now, hackers have never stopped trying to steal. Every day, hackers try to find loopholes to invade centralized systems through various methods.

2. Advantages of CEX

First, the efficiency of executing transactions is not high enough. Decentralized exchanges are mostly run on public chains. Due to the limitations of blockchain technology itself, the block time and confirmation speed of the public chain affect the transaction efficiency, and a transaction takes a long time to confirm.

Second, the blockchain network is difficult to handle high-concurrency real-time transactions, which is easy to form transaction congestion. These deficiencies greatly affect the user experience, and for investors with high-frequency trading and quantitative trading needs, it is completely unbearable. The just-passed "Black Thursday" conducted a stress test on DEX. The plummeting market caused most DEXs to experience varying degrees of transaction delays and blockages, and the user gas fee was too high, resulting in a poor user experience. Centralized exchanges are very good at handling high-concurrency real-time transactions, and the execution efficiency is very high.

Third, users of decentralized exchanges need to properly preserve their public keys, private keys, and mnemonics. Once lost, the assets cannot be recovered. Centralized exchanges match customer information with the transaction address assigned by the exchange. The top exchanges will also have a double verification mechanism to ensure that users' assets are not lost.

 Two types of decentralized exchanges

There are two types of DEX. The first is an order-based P2P exchange, which uses a bidding model to complete transactions. The second type of DEX is an exchange based on liquidity pools, which completes transactions through automatic market makers.

In an order-based DEX, a trader's buy order is matched with another trader's sell order to complete a transaction. The core concept of order-based trading is more suitable for centralized exchanges, which have a centralized structure and strong platform liquidity, which also ensures a tight spread. Therefore, traders face minimal spread losses when placing orders.

DEX allows traders to submit two types of orders, namely limit orders and market orders. Users submit market orders to buy crypto tokens at the best price. Transactions are completed on DEX orders by matching the open orders of buyers and sellers. On the other hand, DEX open orders set a specified price for traders to buy a certain number of tokens. The most popular DEXs of this type include EthFinex, IDEX, and EtherDelta.

The most representative DEX of this type on Ethereum is IDEX. The order-based DEX usage process is similar to that of centralized exchanges. The login method is changed to login to the wallet. The transaction is completed while issuing a limit order. When the depth is sufficient, one asset is exchanged for another asset and returned to the wallet after passing through a smart contract. The first experience of this trustless transaction method will make you feel the charm of blockchain.

The above content is the specific explanation of the editor of the currency circle on the difference between centralized exchanges and decentralized exchanges. At present, the transactions in the cryptocurrency market are still dominated by centralized exchanges, because the transaction process of centralized exchanges is similar to that of banks we are familiar with. Users only need to transfer their encrypted assets to the exchange to complete a series of operations and withdraw their assets to their wallets. However, for some investors who have higher security requirements, decentralized exchanges are a better choice. For those who pursue higher transaction speeds, centralized exchanges are a better choice.