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Author Topic: Centralized Exchange and Decentralized Exchange  (Read 178 times)
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April 11, 2023, 02:54:43 PM
Last edit: April 11, 2023, 03:12:42 PM by Sim_card
Merited by Asiska02 (4), DubemIfedigbo001 (4), Mate2237 (3), knowngunman (3), Ndabagi01 (3), Stable090 (2), HajiBagi (2), Mr.suevie (1)
 #1

I tried using the search engine to see if this topic has been discussed or created by someone but I couldn't find it.
I see it that Newbies are getting it twisted to differentiate between centralized exchange and decentralized exchange thinking that they are the same. Some of them are been deceived by the words. Most centralized exchange confused their customers to make them believe that they are running a decentralized exchange.

Centralized Exchange is an exchange that is own by someone and it is used for the purchase of crpytocurrency and also for the selling of crpytocurrency. In this exchange,a third party is needed to help customers keep their funds,for easy transactions between one another. That is,someone is in charge of every transaction made by conducting the transaction. Examples of centralized exchanges are Binance, Remittano e.t.c.
                Prons of Centralized Exchange
-- Centralized exchanges links people to the crypto market.
--Your wallet is controlled by a third party, this makes it impossible for you not to have access to your wallet.
-- Centralized exchanges are used by traders for trading.
--Some exchanges gives a little interest,if you keep a certain amount of coins in their wallet.
-- Centralized exchange makes changing of bitcoin to fiat and vice versa very easy without passing through stress.
                    Cons of Centralized Exchange
-- You don't have full control over your bitcoin because they are in charge of your keys. Not your keys.....not your coins.
--You can be restricted from having 100% access to your funds,if you want to transfer all your coins to another wallet that is not in their platform.
--You can lose your coin at anytime due to mismanagement of customers funds or a hack into the system.
-- CEX, are not trustworthy,since they can gain your trust on them and scam you in the next minutes,and come with fake excuses. Some of them after scamming their customers, will go and open another exchange with a different name to continue their scam project.
-- Centralized exchange depends mostly on users funds to run their exchange. If most users transfer all their funds at once or on the same day,it will lead to the crash of the exchange due to low liquidity.
-- KYC is important in a centralized exchange which makes users identity known and all transaction can be tracked by government, which makes customers vulnerable to attack. Government can freeze customers funds for any reason.
--Centralized exchange can easily be manipulated by the government.

Decentralized Exchange : Decentralized exchanges are peer-to-peer market places,where crpytocurrency traders make transactions directly without handling over management of their funds to an intermediary (third party). This transactions are facilitated through the use of self-executing agreement written in code called smart contract. DEXs were created to remove the requirement for any authority to oversee an authorized trade performed within a specific exchange. They are noncustodial, which means that users keep p control of their wallets private keys. Users can immediately access their crypto balances after logging with their private keys.
   A decentralized exchange is built on top of a blockchain network that support smart contracts and where users keep custody of their funds. Example of DEXs are bisq
https://cointelegraph.com/learn/what-are-decentralized-exchanges-and-how-do-dexs-work

              Prons of Decentralized Exchange
-- You are in charge of your bitcoin : This means that you keep your funds in your own wallet,where no one can have easily access to.
-- Governments or authority have no access to oversee your transactions because it done anonymously,and therefore,your funds can be freeze.
-- DEX gives its users privacy and security.
-- There is no back door in DEX,which means it cannot be manipulated by government or anyone.
-- It uses P2P trading : You don't need third party to conduct trading for you, you do it yourself, because your transaction is on top of the block chain,and a transaction fee will be paid.
-- Transactions are facilitated through smart contracts.
             Cons of Decentralized Exchange
-- For you to trade your bitcoin to fiat and vice versa,you need a trustworthy person to trade with,if not you can get scammed.
--- You will lose your bitcoin, if you mistakenly send it to the wrong address, because Bitcoin transaction in the blockchain cannot be reversed.
-- If you misplace your seed phrase,you will not have access to trading because your seed phrase is the what you will use to login to DEX.

As bitcoiners it is good we understand about the type of exchange that we are using for trading. I don't think I have written them all,if someone have any addition to this,you can also add yours.
Gracias.
 

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April 11, 2023, 03:17:04 PM
 #2


                Prons of Centralized Exchange
-- Centralized exchanges links people to the crypto market.
It is just platform for buy/sell you are not into direct contact of the other person but if you really want to establish links there are other ways for it.You can buy/sell your coins on these exchanges easily that's it.

--Your wallet is controlled by a third party, this makes it impossible for you not to have access to your wallet.
Do you think this point comes under one of the advantages of CEX? When a third party is having control of your wallet with keys so exactly you claim those funds to be yours if they restrict you? I think you have not heard about the phrase Not your keys,not your coins so for me this is the main reason to avoid these exchanges at all cost and you are categorising it under prons of CEX.

-- Centralized exchange makes changing of bitcoin to fiat and vice versa very easy without passing through stress.
You have again missed the concept of KYC which ends up your privacy completely because they can track you and giving your data to third party sources to be used for illicit activities also.Moreover your bank account is linked and government also know about your funds and can monitor you.In overall if you are okay with it then it's not a problem until it happens with you.

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April 11, 2023, 03:54:34 PM
 #3

cex: bad, unsafe, don't use.

dex: kind of good, not completely safe, use with caution.

there.
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April 11, 2023, 06:51:53 PM
 #4

As bitcoiners it is good we understand about the type of exchange that we are using for trading. I don't think I have written them all,if someone have any addition to this,you can also add yours.
Gracias.
 
You actually did a good job elaborating these two concepts to the understanding of a common layman, because I know this is one crypto term most newbies always get confused about, and you just did justice to it today. So on that note, I will like to add that apart from "Binance & Remitano", we have other examples of centralized exchange such as "Luno, Coinbase & Paxful', while in regards to other examples of a decentralized exchange, we have the likes of "Uniswap, Sushiswap & Pancakeswap" which offers direct peer-to-peer transaction without the help of a middle man.

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April 11, 2023, 07:18:23 PM
 #5

               Prons of Centralized Exchange
-- Centralized exchanges links people to the crypto market.
--Your wallet is controlled by a third party, this makes it impossible for you not to have access to your wallet.
All exchanges link people to the crypto market
Your wallet being controlled by  3rd party means it is very possible that you are blocked out of it when you want to access it.

            Cons of Decentralized Exchange
-- For you to trade your bitcoin to fiat and vice versa,you need a trustworthy person to trade with,if not you can get scammed.
--- You will lose your bitcoin, if you mistakenly send it to the wrong address, because Bitcoin transaction in the blockchain cannot be reversed.
-- If you misplace your seed phrase,you will not have access to trading because your seed phrase is the what you will use to login to DEX.
These are cons of using an exchange and are not peculiar to decentralized ones. Bisq system helps to protect you from getting scammed. Any bitcoin sent to a wrong address is lost, whether done on a Cex or Dex.
Always have a backup of your seedphrase.

I made a thread on exchanges some time ago[1].

[1] https://bitcointalk.org/index.php?topic=5399185.msg60163677#msg60163677

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April 11, 2023, 07:21:04 PM
 #6

cex: bad, unsafe, don't use.

dex: kind of good, not completely safe, use with caution.

there.
You are right about the skepticism that is associated with centralized exchanges there has been proven fact that the safety and privacy protection of the users of the centralized exchanges can be compromised.

Decentralized exchange can be cool, great to use infact it my preferred type of exchange but I want to clear something and that’s there is nothing that’s completely safe, you don’t need to drop your Guard , one rule you should follow is never leave your cryptos in an exchange.

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April 11, 2023, 08:03:53 PM
 #7

There are a couple of threads about this topic:


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April 11, 2023, 08:50:36 PM
 #8

cex: bad, unsafe, don't use.

I don't know if you are a trader or not. but I still trade using CEX. security issues of the exchange we can consider how reputable it is. the most important thing is that we manage our trading assets well. including not leaving our assets on the exchange when we would have left a trade within a certain time. always withdraw our assets to personal wallet, and it will remain safe as long as you use a good exchange. so is the exchange of Dex. in the past there were many Dex exchange projects that we can see. and finally ended scam. be careful with new projects. do not use large enough money to trade.
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April 11, 2023, 08:52:54 PM
 #9

What do you need an exchange for?
You can swap coins in many wallets, you can send off coins like it was intended.
To use an exchange is the same as using a bank, the famous middleman.

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April 11, 2023, 09:00:37 PM
 #10

Lots had been said already about centralized and decentralized exchanges from the past, but the summary to it all is to avoid a centralized exchange in other to remain safe from hack, bankruptcy or KYC tracking on your profile, if you don't have your keys with you then your assets aren't yours yet because they will definitely got stucked one day to their hands as long as you keep remaining with using these centralized exchanges.

R


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April 11, 2023, 09:41:43 PM
 #11

--Your wallet is controlled by a third party, this makes it impossible for you not to have access to your wallet.
This applies to exchanges like Binance and others that people can deposit and trade or maybe withdraw. But not only those exchanges are centralized. Another type of exchanges that are centralized are instant exchanges. You do not have wallet on instant exchanges, but they can seize your coin when you send a coin to the address they control in exchange for another coin.

--Your wallet is controlled by a third party, this makes it impossible for you not to have access to your wallet.
Maybe you do not understand this. Or you means this makes it possible for you not to have access to your wallet? Because it is not your coin and not yours on the blockchain, you have no full control over your own coins, but the exchanges do.

--Some exchanges gives a little interest,if you keep a certain amount of coins in their wallet.
Okay. Can you mention the exchanges that gives interests? Although, if you have coins that you are not using to trade, send them all out of exchanges to noncustodial wallet.

-- Centralized exchange makes changing of bitcoin to fiat and vice versa very easy without passing through stress.
Wrong. All centralized exchanges that exchange fiat to crypto and crypto to fiat needs KYC that needs identity verification. Is that not stress enough?

Also the real P2P are decentralized exchanges.

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April 11, 2023, 10:05:43 PM
 #12

Some of them are been deceived by the words. Most centralized exchange confused their customers to make them believe that they are running a decentralized exchange.
There's nothing like deception there because the modes of operation of Centralized and decentralized exchange are totally different and it is only the newbies that don't do their homework that can be deceived.

Centralized Exchange is an exchange that is own by someone and it is used for the purchase of crpytocurrency and also for the selling of crpytocurrency. In this exchange,a third party is needed to help customers keep their funds,for easy transactions between one another. That is,someone is in charge of every transaction made by conducting the transaction. Examples of centralized exchanges are Binance, Remittano e.t.c.
Both DEX and CEX are owned by someone and both exchange somehow link the buyer and seller. However, all the fund in CEX is controlled by the exchange while DEX operates with a self-custodial wallet.

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April 11, 2023, 10:19:28 PM
 #13

Both of them have their pros and cons. It depends on your need and what kind of exchange you want to use, dex is good if you don't want anyone to take control of your assets but it also comes with some risk. I am not into trading now but from my past experience I can tell that no matter what don't lose control of your assets.
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April 11, 2023, 11:21:35 PM
 #14

Both of them have their pros and cons. It depends on your need and what kind of exchange you want to use, dex is good if you don't want anyone to take control of your assets but it also comes with some risk. I am not into trading now but from my past experience I can tell that no matter what don't lose control of your assets.
I tend to agree with this and it all matters to us where to choose.

And both of them have always matter on these features:
  • Security
  • Liquidity
  • Trading or transaction fees
  • Accessibility

Either DEXs or CEXs have these prons and cons.

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April 11, 2023, 11:44:00 PM
 #15

-- There is no back door in DEX,which means it cannot be manipulated by government or anyone.

They could still be attacked so I wouldn't say they cannot be manipulated. Years ago, someone was able to exploit a vulnerability on bisq, see: https://decrypt.co/24961/hacker-steals-250000-from-crypto-exchange-bisq

Cons of Decentralized Exchange
-- For you to trade your bitcoin to fiat and vice versa,you need a trustworthy person to trade with,if not you can get scammed.

An escrow system is in place so I wouldn't worry about this.

Cons of Decentralized Exchange
--- You will lose your bitcoin, if you mistakenly send it to the wrong address, because Bitcoin transaction in the blockchain cannot be reversed.

It's not really a con cause people just have to be responsible. This is also something that exists in any situation where we have to initiate a crypto transaction including on centralized exchanges.

Cons of Decentralized Exchange
-- If you misplace your seed phrase,you will not have access to trading because your seed phrase is the what you will use to login to DEX.

Which particular platform are we talking about? your seed phrase should only be a backup of your wallet.

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April 11, 2023, 11:50:15 PM
 #16

I tried using the search engine to see if this topic has been discussed or created by someone but I couldn't find it.

You obviously did not use the forum search engine as Baofeng pointed out there are various threads about this topic.

               Prons of Centralized Exchange.
--Your wallet is controlled by a third party, this makes it impossible for you not to have access to your wallet.
This is more of a disadvantage if you ask me, not your keys not your bitcoins. What’s the advantage in having access to a wallet where the bitcoins on your balance isn’t real, they are only numbers the exchange puts there to represent your hodlings. Those who lost their bitcoins in FTX also thought their bitcoins was safe in the exchange wallet.


             Cons of Decentralized Exchange
-- For you to trade your bitcoin to fiat and vice versa,you need a trustworthy person to trade with,if not you can get scammed.

Scammers are everywhere, you just have to be careful. The exchange offer escrow services so you only approve the transaction when you have received payment.


--- You will lose your bitcoin, if you mistakenly send it to the wrong address, because Bitcoin transaction in the blockchain cannot be reversed.
This is a result of carelessness and can happen whether you are sending bitcoins from an CEXs, DEXs, or from a non custodial wallet.

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April 12, 2023, 01:27:16 AM
 #17

That is,someone is in charge of every transaction made by conducting the transaction. Examples of centralized exchanges are Binance, Remittano e.t.c.
I don't understand it.

What does transaction mean here?
Do you mean deposit and withdrawal transactions?

Users (you) are responsible for deposit but not responsible for withdrawals, exchanges are responsible to approve and proceed withdrawals for users.

Quote
--Some exchanges gives a little interest,if you keep a certain amount of coins in their wallet.
Only if you join their staking programs.

Quote
--You can be restricted from having 100% access to your funds,if you want to transfer all your coins to another wallet that is not in their platform.
If your account is restricted or frozen, likely you will not be able to move your coins, not only 10% or any part of it.

Quote
-- Centralized exchange depends mostly on users funds to run their exchange. If most users transfer all their funds at once or on the same day,it will lead to the crash of the exchange due to low liquidity.
Not true. Exchanges need users to earn trading fees for their operations and interests but in fact exchanges can operate with high or low trading volume from users. Exchanges like FTX collapsed because it has bad capital, treasury management which led to insolvency of the exchange under withdrawal pressure of their users.

R


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April 12, 2023, 01:51:19 PM
 #18

             Prons of Decentralized Exchange
-- Governments or authority have no access to oversee your transactions because it done anonymously,and therefore,your funds can be freeze.
-- DEX gives its users privacy and security.
-- There is no back door in DEX,which means it cannot be manipulated by government or anyone.
-- It uses P2P trading : You don't need third party to conduct trading for you, you do it yourself, because your transaction is on top of the block chain,and a transaction fee will be paid.
-- Transactions are facilitated through smart contracts.
             Cons of Decentralized Exchange
-- For you to trade your bitcoin to fiat and vice versa,you need a trustworthy person to trade with,if not you can get scammed.
--- You will lose your bitcoin, if you mistakenly send it to the wrong address, because Bitcoin transaction in the blockchain cannot be reversed.
-- If you misplace your seed phrase,you will not have access to trading because your seed phrase is the what you will use to login to DEX.
Trading via P2P doesn't make your transactions become anonymous, anyone can track it and your funds can't be frozen due to non custodial.

Why you can make sure there's no back door in DEX? it's possible, just depends on the site.

There's no such facilitated through smart contracts, the escrow is the site.

Send to wrong address is also happen in a centralized exchange and most of the times they don't want to reverse your transactions even it's possible.

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EUROPEAN
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Emitdama
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April 13, 2023, 05:41:44 AM
 #19

I don't think that any centralized exchange misguides its users by telling them that they are a decentralized exchange because the difference between the both is evident and doesn't need any explanation.

In the pros of centralized exchanges, you've written that they are used by traders for trading. How is that a pro of a centralized exchange? And what is decentralized exchanges are used for then?

I believe you are also a bit confused about how decentralized exchanges basically work, you don't trade with another person by copying their wallet address and sending the Bitcoins or any other asset to them and then receive the other asset that you want to get in return, so there is no concept of using a wrong wallet address or getting scammed by an individual. All you do is connect your wallet and choose what you want to swap your assets with and the smart contracts will handle the rest once you approve the transaction from your wallet.
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