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

The 5 largest platforms for non-fungible token (NFT) collectibles

  Since the beginning of 2021, non-fungible tokens (NFT) have had no holding back and the sector is setting new records almost every day.  More and more artists, stars and brands are realizing the potential - NFT are well on their way to catapulting the crypto space into the mainstream.  But which collectibles are currently the most popular? What are NFT? NFT are unique tokens that cannot be exchanged one-for-one for an equivalent token.  Any asset that is tokenizable can be an NFT.  This includes, for example, (digital) works of art, trading cards, game items and crypto domains.  Theoretically, however, real estate or securities can also be mapped as NFT. NFTs can be used to transparently map ownership structures on a public blockchain.  This allows them to store value just like real objects, even if additional copies are easy to make.  For example, the original picture of the Mona Lisa is significantly more valuable than a photo, as everyone kno...
11 comments
Read more

CARDALONIA: THE CARDANO METAVERSE OPENS THE GATES!

  Have you ever been to Cardalonia? With these words, the Cardano Metaverse called Cardalonia starts the gates. In this 3D world, developers and users can interact with each other. First of all, users have to create an individual character with which they can move online. After that you can enter one of the worlds built by developers with this character. You can also purchase your own land in the Cardano Metaverse via the marketplaces in Cardalonia . This is secured by Cardano's blockchain technology and therefore offers a relatively secure transfer of ownership. Since these are only digital plots of land, it is not yet entirely clear when the plots of land are purchased whether they can also be sold again in the future. A possible profit cannot be estimated at the moment. In Cardalonia, the cryptocurrency Lonia is used. The maximum amount of tokens in circulation is 100,000,000. The team consists of Alice Sand (Co-Founder), Vasil Air (CTO) and Dustan Water (Fullstack Developer). T...
Post a Comment
Read more

Cardano: This is the vision that founder Charles Hoskinson has

  The Altcoin Cardano has tended to decline in recent weeks.  The Alonzo upgrade was supposed to bring improvements, but it soon turned out to be a disappointment.  Cardano founder Charles Hoskinson presented his vision for the cyber motto in a live Twitter video. • Cardano in the last few months under pressure • Charles Hoskinson explains his Cardano vision via Twitter • Security and privacy at the center The cryptocurrency  Cardano  has had a difficult few months.  While founder Charles Hoskinson's cyber motto has had a strong run in 2021, it has been steadily downhill in recent months.  Cardano is faced with some difficulties.  The so-called Alonzo upgrade went live in mid-September, for which crypto fans had high hopes, but which soon turned out to be a disappointment.  The upgrade should make it possible to use smart contracts on the cryptocurrency as well.  It soon turned out, however, that although these were entered into Cardano,...
Post a Comment
Read more