Decentralised Exchange Vs Centralised Exchange. - Part 2

What an interesting period it is always for me whenever I have the opportunity to actually discuss about the world of cryptocurrency and Blockchain in general. Today I will actually be talking about Decentralised exchange and centralised exchange and I will actually continue from where I actually stopped from.

In my last post I mean the part 1, I make the introduction to the world of cryptocurrency exchange and also I start by explaining the Decentralised exchange. Today we will be continuing from where I stopped from and that is actually talking about the aspect of centralised exchange. So stay tuned as I will be continuing from where I stopped from.

Let's Talk About The Centralised Exchange(CEX)

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Now A Centralised Exchange (CEX) works in a way whereby it is this type of cryptocurrency exchange that have a central authority which manages the affairs of the exchange or the platform. They also operate the same way other Decentralised exchange operates in the sense that it serves as a medium for buyers and sellers as it actually helps to trade cryptocurrency and other digital assets.

Centralised exchange even though it is largely despised by a lot of crypto users due to the fact that it is a centralised base but nevertheless have been able to establish itself as the top exchange in the world of crypto. Briefly I will be discussing the advantages and the disadvantages of Centralised exchange briefly.

Advantages Of Centralised Exchange

• High Liquidity.

Yesterday I was actually talking about Decentralised exchange and I mentioned that it is necessary to establish that DEXs have low liquidity. But when it actually comes with centralised exchange, due to the fact that it gives this high trading volumes that allow the buyers and sellers that should be actively trading on the platform. This high liquidity serve as a major advantage for the centralised exchange because it gives that minimal slippage. That means a large order can easily be filled and the market price will not be felt actually.

• Security Measures.

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One of the things that can really make sure is the fact that there is top security measures in place when it comes to centralised exchanges. Most of the centralised exchange I have come to discover, they actually invest heavily in protecting the security of their users assets compared to the Decentralised exchange. They come up with strong rules like KYC, 2FA and many more to protect the security of the users funds.

• Advanced Trading Features.

Another thing I will really like to mention also is the fact that it helps in the advanced trading features. With the few Decentralised exchange platform I have interacted with like uni swap and many more, I have come to discover that it has this limited advance trading features compared to centralised exchange. Features like stop-loss, margin trading and many more which is lacking in the Decentralised exchange is present in the centralised exchange. This will help to enhance the trading experience of traders.

• Wide Range of Assets.

I have come to discover that centralised exchange offer a much range of cryptocurrency to trade with and they offer this numerous trading pairs also. This will help users to explore and not be limited in their investment portfolio.

• Speed of Transactions.

The last feature I have seen also in centralised exchange which I really love so much is the fact that it gives this huge speed of transactions. Transactions on centralised exchange are always fast and that is really due to their advanced machines engines. This speed plays a crucial role in the experience of every traders also. This can help to make good trading decisions.

Disadvantages Of Centraliised Exchange

Alright, like we always know, everything that has advantages also has disadvantages which we will be looking into briefly also.

• Custodial Risk.

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The fact that centralised exchange have that opportunity to hold the key of users funds gives me this mixed feelings because it means the exchange has control over the private keys. That means as a user, you must trust the exchange with your keys and generally your assets which is not good as you might lose your investments.

• Security Vulnerabilities.

In as much as it actually looks like centralised exchanges have top security measures, it might be a target for hackers and that is why we are actually seeing a whole lot of centralised exchanges platform getting hacked and users losing their funds and assets to hackers.

• High Fees

Due to the high demand that centralised exchange have, they offered this high fees which ranges from trading fees, withdrawal fees and deposits fees. These fees can sometimes be very high and unbearable for some users at the same time.

Alright I will like to stop here. After writing about both the centralised and the Decentralised exchange, I believe you really come to the understanding of which one you will prefer. At the end of the day, I will say it comes down to each other preferences. Some prefer centralised exchange and while some prefer the Decentralised Exchange.

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