If you’ve ever traded crypto, then you likely must have used an exchange or a liquid swap service. In the cryptoverse, the exchange you use tells about your preference. At times, you may have to even create a new exchange account in order to trade a token that’s not available in your favourite exchange.

However, there are different types of exchanges. We have the decentralized exchanges, which we often refer to as DEX, and also the centralized exchanges which is referred to as CEX. These exchanges are mostly differently solely on their methods of operation.

In today’s article, we’ll examine both types of exchanges.

Centralized Exchanges (CEX)

This is the most common type of exchange for cryptocurrency transactions. Majority of crypto traders have accounts with centralized exchanges due to their availability of markets. Coinbase, Poloniex and Binance are examples of exchanges that have a centralized authority.

One reason many users use centralized exchanges is because they are certain of secure transactions. They provide a range of services for users, from account maintenance to other value added services. Before a centralize exchange would consider listing a token, then ensure they are properly vetted.

With regards to security, experts are usually employed to secure the wallet of users against various forms of attacks. Users would not have to manage their keys, balances and transactions without assistance, as is commonly practiced with decentralized exchanges.

Many centralized exchanges also have mobiles apps that makes it easier to trade cryptos with mobile phones. Personally, I prefer to trade with Binance mobile app, than use the web platform. The interface is user-friendly, and not something you’d get in a decentralized platform.

Decentralized Exchanges (DEX)

While a centralized exchange is managed by a centralized entity, a decentralized exchange get rids of that entity in its structure. They offer peer-to-peer transactions with aid of swaps and smart contracts. The transactions are direct between users without any intermediaries. This is even more cost effective.

In the crypto community today, many of the so called “decentralized exchanges” still have traces of being centralized. For example, some of these exchanges are hosted on a centralized server, but claim to offer decentralized services. Hence, the structure does not completely show decentralization.

Security wise, when there is a hack on a decentralized exchange, the exchange is not liable to protect its users. Hence, the users need to have their own security measures in place. However, since the balances on this type of exchange is far lower than centralized exchanges hackers are less likely to be interested.

Decentralized exchanges vs Centralized exchanges

Decentralized exchanges	Centralized exchanges
Relatively low volume and liquidity	High liquidity and trade volumes
Speed of transaction depends on participants	Quick transactions
Limited number of users supported at the same time	Supports multiple users at the same time
No central pool of funds	Transactions are controlled by exchange operators
User funds are not deposited to a central unit	User funds are deposited into exchange accounts before trading can occur
Execution of order is the responsibility of the user	Order execution is the responsibility of the exchange
User have access to their private keys	Users do not have access to private keys
Less prone to thieves and hackers, due low volumes	Prone to attacks from hackers and thieves
Does not serve as a storage platform for users	Serves both as a trading platform and as a crypto storage platform

From the differences between decentralized and centralized exchanges above, we can notice their respective advantages and disadvantages. Hence, some exchanges utilize the advantages of both types.

Best Exchanges

Binance currently leads the exchanges in the crypto community.

Binance

Binance is definitely my favourite exchange. They make trading less stressful, and more of a hobby. It also has one of the lowest transaction changes compared to other centralized exchanges. With simply 0.1% charge, you would even notice much of a difference when you trade crypto on the platform.

Even when Binance was hacked some years ago, users still believed in the platform. And they’ve definitely rewarded users with their progress. The platform offers spot trading, futures trading, margin trading, as well as staking and lending. Their launchpad is also used for launching new tokens into the ecosystem.

Orca

Orca is a nice exchange for swapping tokens on the Solana blockchain. This is one crypto project that has been getting traction in the last few weeks. One interesting factor is that the pricing on the site is based on the price gap of tokens on exchanges. So users have to look at the price impact when buying tokens.

How to Install Metamask

Step 1: Go to Uniswap

Step 2: Select the first option “Install MetaMask”

Step 3: Download Metamask web extension

Step 4: Create a new wallet

Step 5: Select a password that you can remember

Step 6: Save your secret backup phrase, as you can use it to log into your account on a different browser

Step 7: Connecting Metamask wallet with Uniswap

Step 8: Confirm if it is connect to the Ethereum mainnet

How to use Uniswap and Swap tokens on the Platform (with the aid of SafePal Wallet)

Step 1: Go to dApps on SafePal, and select Uniswap

Step 2: Click Pairs on the homepage

Step 3: Connect your wallet to Uniswap

Step 4: Select the coin you want to swap from and the token you want to swap to

Step 5: Confirm the price impact if if correlates with the slippage selected

Conclusion

Exchanges are here to stay. As a crypto trader, when I hear about a new exchange that is genuine and has low charges it gets my attention. Over the years, I’ve learnt to use exchanges to buy tokens irrespective of the type of exchange. Whether it is a centralized exchange or decentralized exchange, the end goal is to get what you want.

CC: Prof @yousafharoonkhan