Centralised or Decentralised Exchange?
Neither model is inherently safe. They simply move the risk between counterparty exposure and self-custody.
A centralised exchange is run by a company that accepts your funds, matches orders in its own system, and holds the assets on your behalf. A decentralised exchange is instead a protocol where you trade directly from your own wallet against a liquidity pool or counterparty, without handing over control of your keys.
What differs in practice
- Custody: the company holds the keys versus you holding them yourself.
- Accountability: an identifiable licensed legal entity versus code with no customer service.
- Identification: customer due diligence and verification versus, generally, no registration at all.
- Error handling: the ability to contact a counterparty versus irreversible transactions you signed yourself.
The risks change shape – they don't disappear
With a centralised provider, the central question is counterparty risk: how funds are held, what licence the company has, and what happens in the event of insolvency. With a decentralised protocol, the risk shifts to code and self-management: smart contract vulnerabilities, incorrectly granted permissions, fake copies of interfaces, and your own mistakes.
Check before you use one
- What legal entity is behind the service, and in which jurisdiction?
- Is the licence registered with an authority – and does the name match exactly?
- How are client funds held, and what happens under a withdrawal freeze?
- For protocols: what permissions are you granting your wallet, and can they be revoked?
Supervision places requirements on the firm. It does not make the asset less volatile and does not replace a deposit guarantee scheme.
03 · SCOPE
This content does not cover
- Comparison or ranking of named exchanges.
- Fee or liquidity data, which changes continuously.
- Advice on whether to trade at all.
04 · SOURCE REGISTER
Sources and check dates
05 · CORRECTIONS AND UPDATES
Correction and update history
No corrections or material updates have been made since publication. Corrections are logged here and in the corrections log.
06 · RELATED NODES
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