Skip to main content

CEX vs. DEX: Why do users prefer centralized services over DeFi?

 


October 2022 saw the most DeFi exploits to date (hacks where the attackers exploit a vulnerability in a system). Along with the rising DeFi hacks, more and more crypto users have to worry about the advantages of centralized versus decentralized exchanges. But what are the differences between these two types of crypto exchanges?


Many members of the crypto community believe that DeFi will be the future of finance . However, the rise in DeFi hacks shows why decentralized exchanges still have a long way to go before it really hits the mainstream.


Crypto beginners mostly prefer a CEX. The user interface is better designed and easier to use in most cases. Using a DEX, on the other hand, can become quite complicated. Some DEX users complained that they could not use crypto exchanges at all due to the user interface.


There is a popular saying in DeFi space: “Not your keys, not your coins”. With a centralized exchange, it is not the user who keeps the private keys of the coins, but the exchange. However, users can access their coins to trade or store the coins themselves by transferring them to a decentralized wallet.


Since a CEX stores all of the users' assets, it offers comparatively more liquidity. DEXs, on the other hand, use algorithms to match buyers and sellers, eliminating the need for intermediaries.


With a DEX, users retain control of their crypto assets as they hold them themselves. However, users are also responsible for storing and managing their private keys themselves. A user can no longer access their funds if the private keys are compromised or lost. Since there is no central entity behind a DEX, no one can help a user recover their wealth if they no longer have access to their private keys.


More and more DeFi users are switching to CEXs

A Metamask user recently reported on LinkedIn how his ETH balance disappeared from his wallet despite being careful to keep his seed phrase “physically” on paper. Such incidents and almost weekly reports of DeFi hacks made users wonder if decentralization is just an excuse for service providers to shirk responsibility.


What vulnerabilities do hackers use to hijack decentralized wallets? Victims of DeFi hacks wonder who should be held accountable if their funds are stolen despite having kept the private key correctly. The crypto community seems to think it's still too early to start using decentralized exchanges on a large scale. Namely, more and more DeFi users are currently shifting their funds to CEXs for security reasons . Many are hoping for the next bull cycle to resolve these issues.

Hackers aren't just targeting DEXs. Mt. Gox, a centralized Japanese exchange that processed over 70% of all bitcoin transactions worldwide, is a classic example. After the attackers stole around 850,000 bitcoin , the exchange suspended trading and other services and took the website offline.


However, according to a statistic from Chainalysis , the vast majority of hacks target DeFi protocols. However, a hack is not the only way a user can lose their funds. Even in 2022, crypto platforms like Voyager and Vauld still had to suspend withdrawals and deposits and file for bankruptcy. The users of these platforms no longer have access to their funds.


It will probably take longer before the decision to use a DEX is as easy as using a CEX. In an ideal world, both options should be good choices.


DISCLAIMER

All information contained on our website has been researched to the best of our knowledge and belief. The journalistic contributions are for general information purposes only. Any action taken by the reader based on the information found on our website is entirely at their own risk.

My Top Picks
Honeygain - Passive earner that pays in BTC or PayPal
MandalaExchange -The Best no KYC crypto Exchange! 
BetFury - Play And Earn BFG for daily Bitcoin and ETH dividends!
Pipeflare - Faucet that pays in ZCash and Matic, Games pay in DAI
Womplay - Mobile dApp gaming platform that rewards in EOS and Bitcoin
Cointiply - The #1 Crypto Earning Site
Torum - Join the latest Social Network and earn TRM for Free! 
LiteCoinPay - The #1 FaucetPay earner for Litecoin 
LBRY/Odysee - YouTube Alternative that lets you earn Money by viewing videos!
FaucetPay - The #1 Microwallet Platform
FREEBTC - The #1 FaucetPay earner for Satoshi's
FaucetCrypto - An earning/faucet site that pays out instantly
FireFaucet - An earning site that pays better for some than Cointiply
DogeFaucet - Dogecoin Faucet
xFaucet - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BCH, BNB, ZEC, FEY - Claim every 5 minutes
Konstantinova - BTC, ETH, LTC, Doge, Dash, Tron, DGB, BNB, ZEC, USDT, FEY, 25 Claims Daily

Comments

Post a Comment

Popular posts from this blog

From offchain to offchain: Statechains meets Lightning

  Without a doubt, the most significant off-chain Bitcoin solution is the Lightning network. But in its wake, the statechain has emerged as an intriguing replacement. There is currently a proposal to link the two offchain networks. From an ocean, for example, you can see sunbeams glistening in the water, waves rippling, and possibly a jellyfish drifting toward the light. But you only see a small portion of it. The distance from the sea's surface to its bottom is hundreds of meters. It has dozens of different fish species swimming in it, crabs and starfish crawling on the bottom, shells clinging to rocks, and sea plants climbing up. A completely new world starts where your gaze diverges. You can picture a blockchain like Bitcoin, just like the sea. What you see on the outside is only a small portion of what is actually there; the set of UTXOs (coins) and transaction history that full nodes store are just the beginning of a much larger world. It's the plan, at least. With Bitcoin
Post a Comment
Read more

MSP Recovery and Tokenology aim to optimize healthcare with the help of Polygon

  MSP Recovery LLC, a Miami, US-based healthcare provider with an estimated enterprise value of $32.6 billion, is partnering with Web3 company Tokenology to jointly launch a new blockchain platform called Lifechain. Lifechain wants to leverage the verifiable and transparent nature of blockchain technology to aggregate medical care claims, medical expense reports and patient data and streamline their processing. For this purpose, MSP Recovery launched its own LifeWallet in January, which already has 1 million users. In addition to the wallet and blockchain platform, an associated crypto token called LifeCoin is also used. The press release explains that the primary purpose of the system is to enable secondary healthcare providers to more effectively bill health insurance companies for their costs. “The number of medical claims tokenized going forward will surpass $50 million per day by 2024. For this we need scalability, security and sustainability, which we have only found with Polygon
Post a Comment
Read more

British financial regulator criticizes cooperation between Binance and Paysafe

  The British financial regulator FCA has expressed concerns about the partnership between market-leading crypto exchange Binance and payment service provider Paysafe. As the British regulator complains, the partnership gives Binance access to the influential British payment network Faster Payments Service (FPS), from which the crypto exchange was previously cut off. Last June, the FCA ordered Binance to stop all business activities in Great Britain. As a result, prominent banks such as Barclays have terminated their cooperation with the leading crypto trading platform . Through the cooperation with Paysafe, Binance can now again offer deposits in British pounds sterling and transactions within the European Payments Area (SEPA). However, this fact is a thorn in the side of the FCA, as it classifies the crypto exchange as a “considerable risk factor”. However, the financial regulator sees little room for maneuver to counteract this, as the Financial Times reports . “ Paysafe understands
Post a Comment
Read more