How to live without CEX | Cryptocurrency News

Living without CEX can be depressing, isn’t it? Well, it might not be as hard as you might think. In fact, you might forget it after a while.

Not convinced yet? In this article, we will highlight the differences between centralized and decentralized exchanges, as well as explore how to navigate the ecosystem while practicing abstinence from centralized exchanges. Let’s jump!

CEX vs DEX: What’s the difference?

Centralized exchanges have been the backbone of the crypto industry for years. However, it appears that they have become one of the most prominent points of failure in the crypto ecosystem.

The collapse of FTX showed that CeFi brings a lot of uncertainty into the game. Now more than ever, crypto enthusiasts are moving away from CeFi and towards DeFi. Before we begin, let’s first define the two types of exchanges.

Centralized Exchange (CEX) Currently the most popular platforms for buying and selling cryptocurrencies. While they are easy to use, offer a wide range of features and support multiple payment gateways, they are also potentially very risky.

Decentralized Exchange (DEX)On the other hand, there are new ones and are becoming increasingly popular. These exchanges are more secure than CEX, they are not vulnerable to attacks. The DEX also offers a wide range of features and is easy to use.

The main differences between centralized and decentralized exchanges come in the form of:

  1. Security: CEXs are more vulnerable to attacks because they are centralized. This means that all the funds stored on the exchange are in one place, making them easy targets for hackers. Funds are also held by the exchange rather than the users, making the funds more prone to misuse. DEXs are decentralized, meaning that funds are stored in individual users’ wallets rather than on an exchange. This makes them much less vulnerable to attack.
  2. features: CEX offers a wide range of features and investment options. On the other hand, DEXs offer less features but are more secure. That being said, decentralized exchanges have improved a lot over the past months and years, and have introduced a variety of features to bridge the gap between the two.
  3. ease of use: CEX is generally considered to be much easier to use than DEX. This is because they have been around for a long time and because they use the same system as regular markets. However, DEXs are becoming more popular, and are much easier to use.
  4. Ability to switch to crypto: The main value proposition of centralized exchanges is that they are the primary gateway into crypto. However, people have more options when it comes to buying crypto with their fiat, with several Web3 platforms offering fiat-to-crypto gateways.

Centralized Exchange (CEX)

CEX’s work the same way you’d see the stock market: they use an order book method.

One order book An electronic ledger that coordinates buy and sell orders on a specific exchange. Every centralized crypto exchange includes an order book, but, as we will see, the order book can be slightly different depending on the CEX. Each order book includes:

  • bids, or purchase orders
  • asks, or sells orders
  • the price at which orders are placed
  • Total amount of cryptocurrencies involved

Each crypto pair has a separate crypto order book. Order books show all limit order data. It refers to the orders that traders and investors choose to place at specific target prices. Users can also use market orders, in which case they are filling limit orders and taking liquidity from the market.

CEX: The Good 👍

Centralized exchanges have several advantages that set them apart from their decentralized counterparts.

Their main advantage is the fact that they have way high liquidity, For example, Binance regularly records over $30 billion in daily trading volume. This ensures that users can exchange their crypto assets at any time, regardless of the size of their orders.

also provide centralized exchange multiple payment gateways: They have long been the primary way to enter the crypto market. Most CEXs support credit and debit card purchases, bank card transfers, and more.

also provide centralized exchange more features, They are a one-stop shop for investors looking to buy, hold, trade or invest in crypto. Decentralized exchanges are generally more dispersed, as they provide a more specialized set of services.

CEX: The Bad 👎

Centralized exchanges come with some major disadvantages.

First of all, they are very vulnerable to attacks Compared to decentralized exchanges. Because all the funds are stored in one place, hackers have more incentive to try to steal them.

There are also centralized exchanges less secure Because the funds are held by the exchange rather than the users. This leaves them more prone to misuse.

Last but not least, the main value proposition of centralized exchanges is that they are the primary gateway into crypto. However, with many Web3 platforms offering fiat-to-crypto gateways, the core advantage of centralized exchanges is becoming less relevant.

Practicing safe CEX usage is important!

The collapse of FTX has raised questions about the security of centralized crypto exchanges. FTX was the second largest CEX in the market. Earlier this month, the exchange suddenly announced it was shutting down and users would not be able to withdraw their funds. This has left many investors concerned about the safety of their funds on centralized exchanges.

While many exchanges are now becoming more transparent and publishing audited evidence of their reserves that reflect the assets and liabilities of the exchanges, there is still room for misappropriation of customer funds.

There have been several cases of centralized exchanges shutting down without warning, leaving investors with no way to access their funds. In most cases, the exchanges have eventually refunded investors. However, there is no guarantee that this will always happen, and investors run the risk of losing their money if an exchange goes bankrupt or closes without warning.

fast facts

The expression “not your keys, not your coins” refers to the fact that you have complete control over your funds only when you own the keys to your crypto wallet.

Centralized exchanges are also vulnerable to attacks from hackers. In January 2019, Binance suffered a major hack in which 7,000 bitcoins were stolen. This is just one example of the many hacks that have taken place on centralized exchanges.

Overall, it is important to be aware of the risks associated with centralized exchanges and take steps to protect your funds. It is recommended that you keep your funds in a wallet under your control instead of handing them over to the exchange. And if you choose to use a centralized exchange, be sure to only deposit small amounts of money there and take additional security measures like 2-factor authentication.

Decentralized Exchange (DEX)

Unlike CEX, Decentralized Exchanges (DEXs) work a bit differently. Instead of using an order book method, most DEXs use liquidity pools to regulate crypto asset pricing.

a liquidity pool Is a digital wallet consisting of two cryptocurrencies locked in a smart contract. This results in the creation of liquidity to create faster transactions between cryptocurrency pairs.

A key component of the Liquidity Pool is the Automated Market Maker (AMM). AMM is a smart contract protocol that uses liquidity pools to allow digital asset trading in an automated manner instead of a traditional market of buyers and sellers. The price of cryptocurrency is determined through a formula.

Benefits of DEX

First and foremost, there are decentralized exchanges more secure Because they are not as vulnerable to attacks from hackers. They do not have a single point of failure, so if one exchange goes down, users can still access their funds on other exchanges. Since users are holding their private keys, there is no risk of hacking multiple wallets at once.

Decentralized exchanges also offer Greater privacy and censorship resistance compared to their CEX counterparts. Because all data is stored on the blockchain, it is very difficult for governments or hackers to track user activity or interfere with transactions.

And finally, decentralized exchanges are a Gateway to the Decentralized Finance and NFT ecosystem, The DEX allows users to access a world of smart contracts and dApps that provide financial services, including lending, staking and savings products, as well as NFT projects.

Disadvantages of DEX

One disadvantage of decentralized exchanges is that they can be a bit high difficult to use, They often have more complex user interfaces than centralized exchanges, and finding the right order book or liquidity pool can be difficult.

Another disadvantage is that DEXs are still relatively new and may not have as many features or as much liquidity as centralized exchanges. they also happen Slower Compared to centralized exchanges. On the positive side, they are rapidly improving and offering a more complete set of features.

Finally, decentralized exchanges can be less reliable Compared to centralized exchanges. This is because they are not as thoroughly tested and may contain more bugs. While it is true that there is no single point of failure like CEX, we have seen many DEX exploits affecting the market.

Trading on DEX

Trading on the DEX is a bit different from trading on the CEX. Once you’ve connected your wallet, you can choose a blockchain and cryptocurrency pair you’d like to work with.

The DEX will calculate the exchange rate for your cryptocurrency, which varies due to fluctuations in the liquidity pool. You can then exchange one cryptocurrency for another.

pro tip

When trading on the DEX, make sure to set your slippage to a percentage you are comfortable with.

On the other hand, if you want to earn passive income, you can act as a liquidity provider for the exchange. However, one thing you have to keep in mind is that you are prone to permanent losses while trading.

Temporary loss refers to the moment when token price changes cause your part of the liquidity pool to be less than the value of your deposits. This loss is said to be temporary as the coin price may recover at a favorable rate. However, this loss becomes permanent if you decide to pull your crypto out of the liquidity pool.

How to buy crypto with credit card?

As we mentioned earlier, decentralized protocols and initiatives are slowly becoming more popular as they have introduced direct gateways to buy crypto without having to interact with digital asset custodians.

Coinstats has partnered with Mercurio and Moonpay to provide its users with a quick and reliable way to buy crypto with a credit card, without having to visit a centralized exchange.

DeFi Tracking

Decentralized exchanges act as a gateway to the DeFi industry, where users can participate in various initiatives, help fund projects, or stake, farm, lend their money. Give, buy NFTs, and more.

But if you choose to step into the world of DeFi, you may face one big problem: your funds will be scattered across different platforms!

CoinStats offers a variety of tools to help users track their portfolios, including price graphs, open orders, and market data. You can track your DeFi and NFT portfolios as well as your CEX or DEX wallet. It is also possible to view your portfolio in different currencies, as well as the distribution of your holdings and profits and losses across different platforms.

Coinstats Portfolio Profit & Loss

Our platform also allows users to compare their portfolio performance with that of other users. Seeing how well you are doing in comparison to others in the community will enable you to draw the right conclusions and improve your investment strategy.

Coinstats is a cryptocurrency portfolio manager platform with over 250,000 monthly active users that provides its customers with a solution to track and manage all their crypto holdings from a single interface.

Visit CoinStats’ homepage or download our app for free google play store And apple app store,

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