Centralized vs Decentralized Exchanges

Modified on Sat, 18 Feb 2023 at 09:26 PM

Centralized cryptocurrency exchanges (e.g. Binance, Bittrex) are currently the most popular form which is run by a single entity. Users of centralized exchanges deposit funds directly with the exchange, and the exchange then handles the security of the funds, and the execution of trades, etc. A major risk with centralized exchanges is their vulnerability to hacking or inappropriate actions conducted by the administrator.


On the other hand, decentralized exchanges remove the risks of theft. Instead of depositing funds right into a wallet controlled by one entity, users rely on digital signatures (message format) to execute trades directly between 2 parties.


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