EXCHANGES: CEX VS DEX
Plain English
A CEX (centralized exchange) like Coinbase is like a traditional brokerage — they hold your assets. A DEX (decentralized exchange) like Uniswap lets you trade directly from your wallet, with code matching trades instead of a company.
Going deeper
Centralized Exchanges (CEX) — Coinbase, Binance, Kraken — operate like traditional financial institutions. They require KYC (Know Your Customer) verification, hold customer funds in custody, and can freeze accounts. They offer user-friendly interfaces, fiat on/off ramps, and customer support. Decentralized Exchanges (DEX) — Uniswap, Curve, dYdX — use smart contracts. You connect your wallet, trades execute on-chain, and you keep custody throughout. DEXes use Automated Market Makers (AMMs) with liquidity pools instead of order books. DEXes are permissionless but require more technical knowledge, have no customer support, and charge gas fees plus trading fees.
Examples
CEX Trade Flow
You deposit $500 to Coinbase, buy 0.01 BTC. The BTC is held by Coinbase on your behalf. When you withdraw, they send BTC to your external wallet. Fast and easy, but Coinbase controls the coins until you withdraw.
DEX Trade Flow
You connect MetaMask to Uniswap. You approve the contract to access your USDC, then swap 500 USDC for ETH. The smart contract executes the trade atomically — your ETH arrives in your wallet in the same transaction. No account needed.