Cryptocurrency trading typically starts on centralized exchanges (CEXs), but many users eventually move on to decentralized exchanges (DEXs) for greater control, transparency, and access to DeFi opportunities. 

This guide covers both types, explaining their differences and helping users transition smoothly from CEXs to DEXs, ultimately leading to onchain self-custody with platforms like Uniswap.

What is a Centralized Exchange (CEX)?

A centralized exchange acts as an intermediary for buying, selling, and trading cryptocurrencies. CEXs are managed by companies that provide a user-friendly experience, custodial wallets, and fiat onramps (allowing users to buy crypto with traditional money).

Some popular CEXs include Binance, Coinbase, Kraken, and Bybit.

Pros of CEXs

• Ease of Use: CEXs have intuitive interfaces, making them beginner-friendly.

• Fiat Onramps: Users can buy crypto with credit cards, bank transfers, and other fiat options.

• Liquidity: High trading volume ensures faster transactions with minimal price slippage.

• Customer Support: Users can recover lost passwords and seek assistance.

Cons of CEXs

• Custodial Risks: Users do not own their private keys, meaning funds can be frozen or lost if the exchange is hacked or collapses (e.g., FTX).
• KYC Requirements: Many CEXs require identity verification, reducing privacy.
• Withdrawal Limits & Fees: CEXs often restrict how much can be withdrawn at once.

What is a Decentralized Exchange (DEX)?

A decentralized exchange (DEX) allows users to trade cryptocurrencies without an intermediary. Instead of relying on an order book managed by a company, DEXs use liquidity pools and automated market makers (AMMs) to facilitate swaps between assets. We cover liquidity pools in-depth in the Liquidity Provisioning section.

Some popular DEXs include Uniswap, PancakeSwap, Aerodrome, and Orca. 

Pros of DEXs

• Self-Custody: Users control their private keys and never have to deposit funds into an exchange wallet.

• Privacy: No KYC is required.

• Permissionless Access: Anyone can trade without approval or restrictions.

• Greater Token Selection: Many new and niche tokens are only available on DEXs.

Cons of DEXs

• No Fiat Support: Users must already own crypto to trade.
• Learning Curve: Requires knowledge of wallets and transaction fees (gas).