Decentralised Crypto Exchanges: DEX vs CEX

A decentralised crypto exchange, DEX for short, is a program on a blockchain that settles swaps itself, without a company holding customer funds in custody. Anyone using one pays two prices: a network fee to the blockchain and a fee to the liquidity pool the swap draws on. On Ethereum the network fee for a swap currently stands at three to five cents, which effectively removes it as an argument.

What remains is the question that fees cannot answer: who holds your coins, who is liable when something goes wrong, and who provides the records for the tax office. This article works out the costs of both routes against each other and shows where the difference really lies.

What separates a decentralised crypto exchange from a centralised one

At a centralised exchange, often called a CEX, you transfer euros to a company account, buy coins there and leave them in place. The house keeps an internal account of your holdings, matches buy and sell orders in its own order book and holds the keys.

At a decentralised exchange the holding stays in your own wallet. You connect the wallet to a website, confirm a signature there, and the program on the blockchain executes the swap. Nobody receives money beforehand, there is no account, no registration and no identity check. That removes the counterparty, but also every place that could correct a mistake.