If you want to make any crypto transaction instantly then, the only reliable option you have is crypto exchanges.

And there are two types of cryptocurrency exchange one is Centralized Crypto Exchange another is Decentralized Crypto Exchange.

Ok, now understand what is central and decentral crypto exchanges then I break it down the exact difference between them for you.

Centralize Exchange.

As the name refers that these exchanges are centralized, that means these exchanges are controls by third parties.

Here, If you want to buy 5 Bitcoin instantly then just go to any centralized crypto exchange and place your order that’s it.

You don’t need any matching transactions to complete your transaction exchange algorithms do it for you.

An interesting fact is, almost 99% of cryptocurrency transactions made through centralized cryptocurrency exchanges.

Decentralize Exchange.

These exchanges are Peer-To-Peer exchanges that means, If you want to buy 5 Bitcoin from Decentralize exchange then your order must be matched by 5 Bitcoin selling order.

This is the working procedure of both exchanges.

Now, look at some Key Differences between them.

Difference Between Centralized and Decentralized Crypto Exchanges

Transactions.

As you already know the key difference between central and decentral exchange is a transaction.

In central exchanges, there is an algorithm that finds exact matching transactions for any buying or selling transactions.

In decentralized exchanges, they only offer a platform to exchange cryptocurrencies they don’t have any algorithm to match transactions.

That mean’s you have to find out exact matching transactions for you.

For example: If you want to buy 10 Bitcoins then you have to find out a seller who wants to sell 10 Bitcoins (Also you can buy 5+5 from two sellers) in decentralized exchanges.

But don’t worry, you can easily find out matching transactions in centralized exchanges.

Also, transactions within central exchanges not recorded on Blockchain because all crypto holdings tied to the exchange address that is why crypto balance remains as it is if you do any transactions within the exchange.

But decentral exchange just provides a platform to complete a transaction by finding the right party they do not hold any crypto deposits that is why every transaction treated separately and record on the blockchain.

Speed.

As compared to centralized exchanges, decentralized exchanges take more time to process transactions.

I already explained the working pattern of both the exchanges with examples.

In central exchanges, you just log in and place Buy or Selling order, that’s it, central exchange match transaction for you instantly.

But, in decentralized exchanges first, you have to log in then you have to search any matching order for you.

If you are not able to find out perfect order then, it can take more time to negotiate orders that match your order perfectly.

That’s why decentralized exchanges consume more time and energy than the centralized exchanges.

Security.

Centralized exchanges are more vulnerable to hacking attacks than Decentralized exchanges.

If you updated with daily crypto NEWS, you notice that at least one centralized exchange pop up with being a victim of hacking attacks in a month.

The interesting fact is, more than 30 exchanges are suffered massive hacking attacks in the last 9 years now numbers are rapidly increasing.

Biggest reasons for hacking attacks is Centralized exchanges have a large number of crypto deposits, that is why hackers eyeball alway on centralized exchanges.

Another big reason is their central authority because, when power is in the hands of a group of people then, it is easy to find the vulnerability in a group.

But that doesn’t mean that Decentralized exchanges do not have any vulnerabilities at all.

Because of their small market and liquidity, they’re remaining unseen for hackers.

But for now, as a security concern, Decentralized exchanges are better than Centralized one.

Fees.

A negligible amount of trading fees offered by Decentralized exchanges than Centralized once, because of the absence of an intermediary allows Decentralized exchanges to offer almost non-existent trading fees.

On the other hand, in Centralized exchanges, central authorities have to manage all expenses and risk that’s why they charge more fees.

Features.

Centralized exchanges have more advanced features than decentralized exchanges.

Because of more competition, centralized exchanges are always looking to go ahead of their competitors. That’s why they need to upgrade themselves frequently.

You can find out advanced trading functionalities such as margin trading and stop losses in centralized exchanges.

But on the other hand, decentralized exchanges are way behind in implementing advanced features because of low liquidity and tiny market space.

That is why it is more difficult for daily traders to utilize decentralized platforms.

Liquidity.

Centralized exchanges have more cash flow than the decentralized exchanges.

I already mentioned the fact that 99% of crypto transactions made through centralized exchanges. This is a big reason for centralized exchanges have more liquidity.

More transactions mean, crypto funds flowing constantly on centralized exchanges.

But decentralized exchanges act as a platform for buyers and sellers in there they can meet negotiate and deal done.

Conclusion.

Above are the main difference between centralized and decentralized exchanges.

But they also have some small differences in Signup procedures.

In decentralized exchanges, you can simply fill out signup details like your E-mail, Name, and Passwords.

But in centralized exchanges sometimes they ask you to give personal details and ID verifications for signup. That leads to data theft because of centralized exchanges more vulnerable.

Instead of all these differences, centralized exchanges still, win the game in front of decentralized exchanges.

Because they are more user-friendly, but here I’d like to mention a point that Cryptocurrencies main intention is to give power to users, not some selected people.

I know decentralized exchanges way behind from centralized exchanges, but I think they also have better future like centralized exchanges.

What do you think? Mention in the comments section.

What steps you recommend decentralized exchanges should take to attract more users, mentions those in comments.

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