Cryptocurrencies are becoming more popular and accessible, but how do you choose the best platform to trade them? There are two main types of platforms: centralized exchanges (CEXes) and instant exchanges. Each has its own advantages and disadvantages, and the best option for you depends on your goals and preferences. This article explains CEXes and instant exchanges, how they differ, and what factors to consider when choosing between them.
What Is a Centralized Exchange (CEX)?
A centralized exchange (CEX) acts as an intermediary between users and enables them to buy, sell, and trade cryptocurrencies. Such platforms require users to register and verify an account, usually by providing personal and financial information. Depending on the verification level (KYC procedure), users may have access to different functionalities and limits on deposit and withdrawal amounts. Users also need to store some funds in their accounts to use CEXes.
CEX Advantages
Centralized exchanges have risen to their current levels of popularity due to a plethora of advantages that attract the attention of crypto enthusiasts:
- Rapid transaction processing: They offer rapid transaction processing, bypassing blockchain confirmation delays.
- Diverse trading features: Their diverse trading features include spot, margin, futures, and options trading.
- Lower fees: Economies of scale and network effects enable CEXes to impose lower fees than instant exchanges.
- Various order types: Users also benefit from various order types like market, limit, and stop orders.
- Lower minimums: CEXes typically have lower minimum deposit and exchange requirements than instant exchanges.
CEX Disadvantages
While the advantages of centralized exchanges are indeed compelling, it is crucial to acknowledge that these platforms are not without their share of drawbacks:
- Custodial risk: They store users’ funds in their own wallets, which means that users do not have full control over their assets and may face the risk of hacking, theft, or loss.
- Require KYC verification: Compliance with Know Your Customer (KYC) regulations means users must surrender personal and financial details, possibly compromising their privacy and access to specific markets.
- Deposit risks: CEXes require users to deposit funds into their accounts, which can lead to fund blockage and loss, as they don't typically return deposits failing AML checks.
- Hidden fees: They might impose hidden fees, including order, withdrawal, and network fees, which lack transparency and predictability.
- Limited token selection: CEXes have limited trading options. Many cryptocurrencies can only be traded against primary tokens like USDT, BTC, or ETH. This limitation restricts traders' ability to directly exchange a wide range of cryptocurrencies.
What Is an Instant Crypto Exchange?
An instant exchange operates as an intermediary between a user and various liquidity providers. This means the number of coins supported by an instant exchange may be much higher than a separate CEX, as it can access liquidity from different sources. Also, the limits for swaps are really high, as an instant exchange can use the best available rates from different providers. Most importantly, such platforms do not require mandatory account verification and do not store their users’ funds.
Instant Exchange Advantages
Engaging with an instant crypto exchange unlocks a multitude of advantages, catering to both newcomers to the crypto sphere and seasoned traders alike:
- Anonymity and security: They allow users to maintain anonymity and security without mandatory account registration or verification, enabling access to any market or jurisdiction.
- Cryptocurrency variety: Instant exchanges support a wide range of cryptocurrencies, including rare and exotic ones, as they can source liquidity from different providers.
- User control: These platforms do not store users’ funds in their own wallets, meaning that users have full control over their assets and do not risk hacking, theft, or loss.
- Better rates: Instant exchanges can offer better rates and faster execution than CEXes, as they can aggregate liquidity from different sources and use smart algorithms to find the best deals.
- Transparent costs: Unlike CEXes, instant exchanges include all fees within the exchange rate, ensuring no hidden costs.
- Direct swaps and flexibility: While CEXes might offer lower minimum amounts for deposits and exchanges, instant exchanges provide direct swaps in just a few clicks, even between lesser-known trading pairs not limited to major currencies like USDT, BTC, or ETH.
- No fund blocking: Instant exchange does not block your funds or freeze your account for any reason, as it has no authority over your assets. If your deposit does not pass the AML check, the instant exchange will simply return it to you, unlike a CEX, which may confiscate it or ask for more information.
- Multi-network support: On many CEX, popular tokens such as USDT are typically available only on top networks. This limitation restricts users who operate in or prefer other blockchain networks. In contrast, instant exchanges endeavor to support as many networks as possible, providing users with more options and flexibility.
Instant Exchange Disadvantages
While the advantages of instant crypto exchanges are evident, it is essential to acknowledge that there are certain drawbacks that merit attention:
- Limited trading options: Instant exchanges do not offer various trading options, such as spot trading, margin trading, futures trading, options trading, etc., as they only facilitate simple swaps between cryptocurrencies.
- Transaction processing time: They may take longer to process transactions than CEXes, as they rely on blockchain confirmation times and the availability of liquidity providers.
- Higher fees: Instant exchanges charge higher fees than CEXes, as they need to cover the costs of sourcing liquidity from different providers and ensuring the security of the transactions.
LetsExchange vs. CEXes
As we mentioned above, there are centralized exchanges (CEX) and instant exchanges for exchanging cryptocurrencies. Each of them has its own advantages and disadvantages, and choosing the best one depends on your goals and preferences. In the table below, we will compare five popular CEXes and LetsExchange, an instant exchange that offers fast, secure, and convenient cryptocurrency exchange.
Which Exchange Type Is Right for You: 7 Factors to Consider
Choosing the best cryptocurrency exchange for you depends on your needs and preferences. Here are some factors to consider when choosing between a CEX and an instant exchange.
1. Security
CEXes are custodial services that may be vulnerable to hacking, theft, or fraud, while instant exchanges are non-custodial services that do not store your funds.
2. Fees
Centralized exchanges usually charge lower fees than instant exchanges, but hidden fees may add up to your total cost. Instant exchanges include all the fees in their exchange rate, but they may charge higher fees to cover their costs.
3. Transaction speed
CEXes can process transactions quickly, as they do not rely on the blockchain confirmation times. Instant exchanges depend on the blockchain confirmation times, which can vary depending on the network congestion and the transaction fees.
4. Functionality
Centralized exchanges offer advanced trading options, such as margin trading, futures, and options, and a variety of tools and features, such as charts, indicators, order types, and trading bots. Instant exchanges offer simple and fast swaps without advanced trading options or features.
5. Variety of coins
Instant exchanges offer a broader range of coins and tokens than CEXes, as they can access liquidity from multiple sources. CEXes have fewer assets and may require swapping some coins through multiple platforms or intermediaries.
6. Limits
CEXes have lower limits for deposits and withdrawals depending on your verification level. Instant exchanges have higher limits for swaps, as they leverage liquidity from multiple sources, allowing for more significant transactions.
Conclusion
CEXes and instant crypto exchanges are two types of platforms that can help you buy, sell, and trade cryptocurrencies. They have different features, pros, and cons, and the best choice for you depends on your preferences and goals. Here are some of the main differences between them:
- Centralized exchanges are intermediaries for cryptocurrency transactions, necessitating user registration and verification. Despite offering fast transactions and diverse trading options, CEXes have risks like custodial services and mandatory KYC procedures.
- In contrast, instant exchanges operate as intermediaries between users and liquidity providers without mandatory verification. These exchanges prioritize user security with a non-custodial approach, providing a broad coin selection, direct swaps, and promotional codes for enhanced rates. While potential higher fees exist, instant exchanges offer flexibility and asset control without compromising user privacy.
LetsExchange platform supports over 4,000 crypto assets and 60+ fiat currencies and offers instant swaps with high amounts. We support a broader range of networks than most CEXes, making trading tokens beyond the top networks possible. You can also use promo codes to get better rates and enjoy the benefits of non-custodial security, deep liquidity, and anonymity.