Centralized exchanges (e.g. Coinbase, Binance, and Kraken), and decentralized exchanges (e.g. Uniswap, Jupiter, and Raydium) are both types of online marketplaces where users can buy, sell, and trade cryptocurrencies.
The difference between them is how they’re managed: A CEX is run by a single entity that oversees all transactions. A DEX is run by blockchain programs called smart contracts, which execute transactions automatically.
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Same transaction, different exchanges
Suppose John has Ethereum in his wallet (a tool that lets people send and receive crypto), and he would like to trade it for Solana.
Let’s see how this would play out on the two different exchanges.
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CEXs vs DEXs
In a separate MoonPay Minute on crypto exchanges, we listed some of the major differences between CEXs and DEXs. While these differences are many - speed, fees, etc. - the one difference that always distinguishes a CEX from a DEX is user control: CEX users do not fully control their crypto, while DEX users do.
In crypto jargon, CEXs are custodial: the entity running the exchange has custody of users’ crypto. DEXs, meanwhile, are non-custodial: users have full control of their crypto
In this way a CEX is like an auction house, where users participate in auctions under the supervision of the auctioneer, and a DEX is like a local farmer’s market, where all the equipment is provided to facilitate trades (booths, tables, etc.) but nobody is in charge.
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