DEX and CEX Salaries and Rates in 2024

DEX and CEX

Centralized Exchange (CEX)

Centralized exchanges (CEXs) are cryptocurrency exchanges that oversee and process the trading of crypto assets between users, using an intermediary. Similar to electronic stock exchanges which have created vast impersonal markets for stocks and stocks futures and options, CEXs use databases to compute and display a quote for the best buy order price, along with a quote for the best sell order price.

A further vulnerability arises because CEXs also usually serve as crypto on- and off-ramps. Most allow users to fund their accounts with fiat currency or liquidate crypto assets back to fiat.

How do CEXs work?

You might have to KYC before you can even start trading on centralized exchanges, where you upload a photo of yourself, your government identity, address proof, and signature.

After that, you can deposit your fiat currency or crypto to start buying or trading the crypto assets listed on the exchange.

On the other hand, as soon as you place a buy order on a CEX to acquire units of a particular crypto token, the matching engine of the CEX looks for a sell order that happened to have been placed at the same price as the price at which your order is to buy the same token that is going to be matched for the token you wanted to buy to be added to your account.

Decentralized exchange (DEX)

DEXs are decentralized crypto exchanges that allow for the direct trading of one crypto token for another without a central intermediary; and DEX trades are non-custodial, meaning that each counterparty to trade simply deposits and withdraws it from their cryptowallet and does not need to place their funds in what could be a vulnerable exchange. Besides being non-custodial and decentralized, DEXs are also permissionless, meaning anyone can use a DEX without any identifying information.

How do DEXs work?

With traditional exchanges, a central company performs the function of matching buy/sell requests; for decentralized exchanges, this occurs via automated smart contracts, which sniff out incoming token swap requests.

DEXs functioned using on-chain order books, every node of which had to see the purchase order before a trade was completed, resulting in transactions that were unusually turgid.

The fix: automated market makers (AMMs) in decentralized exchanges that use pairs of crypto assets stocked into a pre-funded pool called a liquidity pool, typically on a 50/50 basis.

Indeed, some of today’s largest digital exchange platforms (DEXs), such as Uniswap, Pancakeswap, Curve, and many others, are all an AMM protocol.

When there is no order book available that can use information on supply and demand to update an asset’s price, AMMs use a mathematical formula instead.

The most common numerator is a product: token balances × token balances = constant, or x*y = k. In other words, a constant balance of tokens represents a stable pricing of tokens in the pool.

Centralized exchanges pros and cons

Pros of CEXs

• High liquidity
• Simple fiat-to-crypto transactions
• Fast transactions
• More user-friendly
• More trading features

Cons of CEXs

• No privacy
• Lack of control
• Loss due to hacks

Decentralize exchanges pros and cons

Pros of DEXs

• Self-custody
• Reduced security risk
• No account restrictions
• Access to rare tokens

Cons of DEXs

• Limited trading options
• Slower transaction speed
• Lower trading volumes and liquidity
• Less user-friendly