An exchange is a website that allows you to buy or sell cryptocurrencies.
There are two main categories of exchanges: Centralized Exchanges (CEX) and Decentralized Exchanges (DEX).
Centralized Exchanges, such as Binance, KuCoin, or Bitget, are the most well-known type of exchange. Easy to access and use, they allow users to conveniently purchase cryptocurrencies in multiple currencies and offer superior liquidity. They also provide a wide range of features. The downside lies in the fact that these platforms are entirely centralized; the cryptocurrencies held there belong to the exchange and not to the users (“not your keys, not your coins”). Consequently, if an exchange gets hacked, goes bankrupt, or turns out to be a scam, users risk losing all their funds—as was the case with the collapse of FTX in 2022.
Decentralized Exchanges, such as Uniswap or PancakeSwap, are the exact opposite of CEXs. They are more difficult to access because they require using a wallet, knowing how to perform blockchain transactions, and interacting with dApps (decentralized applications). However, they are far more secure in terms of ownership. DEXs are decentralized because they run on the blockchain. This means that you have full control over your cryptocurrencies. You are almost never at risk of the human management problems mentioned above, even though hacks can still happen at the code level.DEXs also provide access to a wider selection of cryptocurrencies, as anyone is free to list any token they wish—with all the associated risks (scams, low liquidity, rug pulls). Unlike a CEX, they do not have customer service, which means any user error is permanent.
Depending on your needs, you may find yourself using one or both types of exchanges. The conclusion remains the same: do your own research (DYOR).