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Since cryptocurrency appeared globally, people who understand its value are constantly developing platforms to encourage the buying and selling of crypto products. Cryptocurrency can be traded using two methods: trading through an exchange and over-the-counter (OTC) trading. Cryptocurrency, in a nutshell, allows a transaction to occur without having to go through an intermediary, but in reality, customers indeed have no choice but to use an exchange to trade cryptocurrency. Centralized exchanges, which are operated by a specific management entity, have built their reputation and trust through a long history in the market. For various reasons, decentralized exchanges such as Uniswap and SushiSwap are starting to gain interest too.
Centralized Exchange (CEX)
Currently, most cryptocurrency exchanges are centralized exchanges. A centralized exchange is a system that collectively manages all users' assets on a centralized server. Centralized exchanges have the advantages of fast transaction processing speed and overwhelming transaction volume, but the security vulnerability can put assents at risk if the central server is attacked.
In fact, throughout the year, even the big global exchanges such as Binance and Upbit have experienced the hack attempt.
Some options can help minimize these problems, such as custody services, multi-signature systems, and cold wallets.
Decentralized Exchange (DEX)
Decentralized exchange (DEX) has emerged as a solution to the security vulnerabilities of the centralized exchange mentioned above.
Unlike centralized exchanges, which operate so that cryptocurrency transactions are made between sellers and buyers through exchange wallets, in DEX, sellers and buyers conduct P2P (Person-to-Person Transaction) transactions between cryptocurrency wallets.
In other words, DEX does not store customer assets but serves as a bridge between sellers and buyers. The transaction history is stored on the blockchain when the transaction is completed. Therefore, this provides transparency of the transaction. As the asset does not go through the exchange's wallet, the risk of asset loss due to hacking is reduced.
However, it isn't easy to see Dex as the perfect answer. Although there are advantages, it has limitations such as slow transaction speed, less up-to-date technology, and inconvenient UI.
In addition, it is somewhat unreasonable to consider the more robust security system as the ultimate solution as there is still the possibility of leakage of the private key that manages the wallet. Since transactions are made between individual wallets, there is a possibility that the private key that controls the wallet may be leaked. In addition, unlike centralized exchanges, it is challenging to receive protection from investment fraud as there is no management entity.
Hacking organizations are evolving into methods of stealing cryptocurrency exchange user accounts, manipulating the market price with the account, and then stealing cryptocurrency. After collecting previously leaked personal information from the dark web, etc., It's about finding an account you have and working on it. In other words, individual device security must be well prepared.
CEX vs. DEX
The question is, which type of exchange is a better option? Interestingly, there is no correct answer to this question at the moment. Although most of the DEX trading methods in the market are decentralized, it is still difficult to say that they are 100% decentralized because many other components are still using the centralized techniques. Although DEX claims to be a model that improves all the shortcomings of CEX, it is not yet perfect. Therefore, it is most important to find a reliable exchange that can protect your assets, whether CEX or DEX.
MCS, which puts trader asset protection as its top priority, promises the safety of assets through the industry's top-tier multi-signature cold wallet
Traders always come first on MCS!
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