A 2024 systematic literature review of exchange models sets out the two types. A centralized exchange is generally owned by a central organization that holds users' assets in its collective wallet. A decentralized exchange leaves each user's cryptocurrency in that user's own wallet. Custody, meaning who holds the coins, is the main line between them.
Key facts from the 2024 review
- Custody: A centralized exchange keeps users' assets in its collective wallet. In a decentralized exchange, cryptocurrency remains in each user's wallet.
- Identity checks: Know Your Customer (KYC) and anti-money laundering (AML) checks feature prominently in the literature.
- Review date: Published online May 18, 2024. Covers literature from January 2019 to September 2023.
What a centralized exchange is
Eigelshoven et al. (2021), quoted in the review, describe a centralized exchange as keeping a user's assets in the exchange's collective wallet. Xia et al. (2021) say all user activities and digital assets are under the control of the central operators. A blockchain community post describes custody the same way: user funds are stored in exchange-controlled wallets.
What a decentralized exchange is
Eigelshoven et al. (2021), quoted in the review, describe a decentralized exchange as using smart contracts or other peer-to-peer networks. Those tools execute exchange functions and enable non-custodial trading, meaning the user keeps control of the coins. Makridis et al. (2023) say decentralized exchanges are non-custodial, and that cryptocurrency remains in each user's wallet. A blockchain community post adds that only the holder of the private key can access the funds. Johnson (2020) says a decentralized exchange is not a single point of failure, unlike a centralized exchange. A separate explainer covers how Ethereum smart contracts work.
DEXs are non-custodial: cryptocurrency remains in each user’s wallet.
Trade-offs: liquidity and features
The review credits centralized exchanges with higher liquidity, advanced trading features and a more established track record. It says decentralized exchanges emphasize decentralization, user control and resistance to censorship.
Ease of use and risk, per a vendor
Delta6Labs, a vendor blog with no visible date, says centralized exchanges suit new traders. The reason it gives is a simple user interface with no technical complexities. The same blog adds that centralized platforms with access to users' wallets are vulnerable to hacks.
On fees, Delta6Labs says decentralized exchanges usually have a lower fee structure than centralized ones. They can also charge gas fees for blockchain transactions, and those may vary with network congestion. Set side by side, the attributed points on six topics read as follows:
Centralized vs decentralized at a glance
Read across each row to compare the two models on custody, identity checks, fees, strengths, ease of use and risk.
| Topic | Centralized exchange | Decentralized exchange | Source |
|---|---|---|---|
| Custody | The platform holds users' assets in its collective wallet | Coins remain in each user's own wallet | Source: Centralized exchanges vs. decentralized exchanges in cryptocurrency markets: A… (econstor.eu), May 18, 2024 |
| Identity checks | The 2024 review says Know Your Customer (KYC) and anti-money laundering (AML) checks feature prominently in the literature | A promotional article says it has no registration requirements or KYC process | Source: Centralized exchanges vs. decentralized exchanges in cryptocurrency markets: A… (econstor.eu), May 18, 2024 · Centralized vs Decentralized Cryptocurrency Exchanges — Explained Simply! |… (hackernoon.com), accessed Oct 20, 2026 |
| Fees | Usually higher than decentralized fees, per a vendor | Usually lower, but gas fees may apply and vary with network congestion | Source: Centralized vs Decentralized Exchanges: Choosing the Right Crypto Exchange (delta6labs.com), accessed Oct 20, 2026 |
| Stated strengths | Higher liquidity and advanced trading features | Decentralization, user control and resistance to censorship | Source: Centralized exchanges vs. decentralized exchanges in cryptocurrency markets: A… (econstor.eu), May 18, 2024 |
| Ease of use | Simple interface, suited to new traders, per a vendor | Not rated in the sources cited here; a vendor names centralized exchanges as the better fit for new traders | Source: Centralized vs Decentralized Exchanges: Choosing the Right Crypto Exchange (delta6labs.com), accessed Oct 20, 2026 |
| Risk | Central operators control user assets (Xia et al., 2021); a vendor says wallet access makes hacks a risk | Not a single point of failure, according to Johnson (2020) | Source: Centralized exchanges vs. decentralized exchanges in cryptocurrency markets: A… (econstor.eu), May 18, 2024 · Centralized vs Decentralized Exchanges: Choosing the Right Crypto Exchange (delta6labs.com), accessed Oct 20, 2026 |
The table shows attributed claims from sources of different dates and quality, not current fee levels or verified incident rates.
Privacy and identity checks across the sources
The sources describe privacy and identity checks differently. A promotional article, dated 2019 by its page metadata, says a decentralized exchange offers enhanced privacy with no registration requirements or KYC process. A separate source, the 2024 review, says KYC and AML checks feature prominently in the literature. It adds that these checks influence which exchange traders and policymakers choose. It also says academic works list hybrid exchanges as an alternative to the strict split, but describe them only imprecisely. The line between the two types is not always clean.
How current the evidence is
The review reports about 500 decentralized exchanges (DEXs) compared with about 300 centralized exchanges (CEXs) as of October 2023, citing CoinGecko. Those counts are a snapshot from that month, not a current figure. Only part of the review was read for this article, and current fee levels and verified incident rates are not covered by the sources cited here.
Analysis: what the split means in practice
A centralized exchange can offer higher liquidity, but the operator then holds the coins. A decentralized exchange keeps the coins in the user's wallet, though a vendor notes gas fees that vary with network congestion. For a first purchase, the practical question is who holds the coins after the trade. The answer depends on which risk you can carry, not on a single verdict.
Next in this topic
A separate explainer covers what KYC is. A separate explainer covers how a non-custodial wallet keeps keys and backups.
Sources: Centralized exchanges vs. decentralized exchanges in cryptocurrency markets: A… (econstor.eu), May 18, 2024 · Understanding the Difference Between Centralized and Decentralized Crypto… (community.nasscom.in), accessed Oct 20, 2026 · Centralized vs Decentralized Exchanges: Choosing the Right Crypto Exchange (delta6labs.com), accessed Oct 20, 2026 · Centralized vs Decentralized Cryptocurrency Exchanges — Explained Simply! |… (hackernoon.com), accessed Oct 20, 2026
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