Difference Between Centralized vs Decentralised Exchanges

Exchanges typically allow crypto users to store, trade, send and receive cryptocurrencies. Most of these exchanges help investors trade multiple digital currencies along with managing their portfolios. As a consequence, crypto exchanges generate income through transaction fees and commissions.

This means you can trade multiple digital assets on various crypto exchanges. The bottom line is that each platform comes with different features and pricing plans. You can therefore choose a suitable exchange like TheNewsSpy.technology that suits your needs.

In this article, we explore the differences between centralized and decentralized exchanges.

Before diving into details about the differences, we highlight what a decentralized exchange means.

Decentralized exchange

Typically, decentralized exchanges enable users to make peer-to-peer transactions without the need of using a third party. On the flip side, decentralized exchanges do not support fiat currencies. This means you can only trade digital currencies on the platform.

Some of the major decentralized exchanges include AirSwap, Barterdex among others.

Benefits of using Decentralised exchanges

  1. Reduces the risk of hacking

One of the key advantages of using a decentralized exchange is that it eliminates the risk of hacking. Being that it doesn’t involve a third party, the risk of being targeted by hackers is minimal. This offers better safety from theft and hacking.

  • Market Manipulation

The peer-to-peer trading option eliminates fake trading which is subject to manipulation. As such, to trade in a free and secure crypto ecosystem, decentralized exchanges are a perfect option.

  • Data privacy

Unlike centralized exchanges where users have to present their details to get approval, decentralized exchanges eliminate such requirements. This means traders on decentralized exchanges can remain anonymous in their trades.

The shortcoming of Decentralised exchanges

  1. Complex

The major undoing about decentralized exchanges is that users must recall their keys and passwords lest they will never access nor recover their profile. Contrary to centralized crypto exchanges that offer a user-friendly platform, you must learn how a decentralized exchange works before investing.

  • Doesn’t support fiat payments

Decentralized exchanges do not support trading fiat currencies for crypto. This makes them less attractive for investors looking for a flexible exchange platform.

  • Lack of liquidity

Being less attractive to crypto investors, finding buyers for your crypto on the platform may also be challenging. With a majority of crypto investors being conducted on centralized exchanges, it may not be easy to successfully trade on decentralized exchanges.

Some of the most popular decentralized exchanges that you can invest in include, Uniswap, Tokenlon, Sushiswap, Compound, Venus, and many others.

Benefits of using a Centralised exchange

  1. Intuitive interface

Centralized exchanges come with an array of helpful features that new users can leverage to grow their trading portfolio. Unlike peer-to-peer transactions and crypto wallets which can be challenging for some investors, centralized exchanges allow users to log in to their account, check balances, and complete transactions via other platforms.

  • Reliability

When it comes to secure transactions, centralized exchanges come with advanced security features that you can leverage to secure your crypto holding. One of these key features includes enabling transactions through a centralized system which makes it easy to not only secure your crypto but also manage your portfolio.

Shortcomings of using a centralized crypto exchange

  1. Prone to hacking

Centralized exchanges are run by companies that take full control of all the crypto stored on the platform. As such, they are prone to attackers who can hack through to steal from investors.

For example, Mt.Gox was suspended following the loss of over 850,000 bitcoins on the platform.it is against this backdrop that risk factors associated with centralized exchanges can be enormous.

  • Transaction fees

Contrary to peer-to-peer transactions, centralized exchanges are associated with high transaction fees. The fees can at times be exorbitant especially when trading a high amount.


If you are yet to invest in crypto, then it’s high time you consider choosing a decentralized exchange. Whereas centralized exchanges come with an array of advantages, they have a low trading volume which may make it challenging for you to generate profit from your trades.

Having said that, you should choose a platform that not only guarantees profitability but comes with advanced features to secure your crypto investment. Every crypto exchange comes with various advantages hence you have to choose one that fits your investment portfolio.

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