Exchanges: Centralized vs Decentralized
Crypto trades on two structurally different venue types, and the difference is more fundamental than in traditional markets.
Centralised exchanges
Binance, Coinbase, OKX. These run order books much like an equity exchange, with matching engines, market makers and familiar order types.
Advantages: deep liquidity, tight spreads, fast matching, derivatives, and margin. For a professional trading operation, this is where the volume is.
The cost: you do not hold your assets. Deposits are the exchange's liability to you. That is straightforward counterparty risk, and it has repeatedly been realised: several large exchanges have failed with customer funds, most notoriously in 2022.
Firms manage this by holding minimal balances, spreading across venues, and withdrawing profits regularly, which is exactly the discipline used with any unrated counterparty.
A balance on a centralised exchange is an unsecured claim on that exchange. Size it as counterparty exposure, not as cash.
Decentralised exchanges
Uniswap and similar protocols run as smart contracts. You trade from your own wallet, and never give up custody.
Most use an automated market maker rather than an order book, pricing trades from a formula against a pooled reserve of assets. See DeFi and AMMs.
Advantages: self-custody, permissionless listing (new tokens appear here first), and full transparency.
Costs: every trade is an on-chain transaction, so you pay network fees and wait for confirmation. Slippage is typically worse for size. And the pending transaction is publicly visible before it executes, which exposes you to front-running.
Smart contract risk is real: the protocol may hold your funds correctly, or it may contain an exploitable bug.
Neither column is the safe one. They fail in different ways, and the risk you are taking is a different risk.
What professionals actually do
Both, for different purposes.
Centralised venues for the bulk of liquidity, derivatives and anything requiring speed. Decentralised venues for new tokens before listing, and for arbitrage between the two.
That last one is a substantial business. Prices diverge between CEX and DEX because the arbitrage requires capital on both sides, on-chain fees and timing risk, so the band is wide by traditional standards.
Crypto market structure resembles equities before consolidation: many venues, no consolidated tape, meaningful price differences. The inefficiency is real and the operational cost of capturing it is what keeps it there.