Exchanging ZEC to ETH on CEXs and DEXs: Main Pros and Cons
Around 500 cryptocurrency exchange platforms facilitate crypto swapping worldwide. However, they all offer different features, options, and requirements. This makes it hard to choose the right platform for you.
Generally, there are two types of exchanges that have fundamental differences: centralized and decentralized platforms. How exactly do they differ? Where is it better to convert XMR to ETH? Find out below.
Centralized or Decentralized Exchange for ZEC to ETH Swap?
A centralized crypto exchange is created and controlled by a certain organization that acts as an intermediary in a transaction. They require you to deposit funds to a wallet on the platform, and only then exchange, buy, or sell other assets. The execution of crypto trades is proceeded within their internal systems. Generally speaking, such a platform is in control of every transaction you make, checks the compliance of the participants, and keeps your assets safe.
Decentralized exchanges work in a different way. They do not control the funds of counterparts and do not keep your assets within the platform. DEXs allows the users to keep full responsibility of their coins, only providing a medium for exchange and asking for just a wallet address.
Advantages and Limitations of CEXs
Certainly, centralized crypto exchange platforms have their pros. Check what benefits they offer:
1. Suitable for beginners
As a rule, CEXs offer an easy-to-use system and interface, which is crucial for beginners in crypto. Everything a novice needs is in the same place, and there is no need to create separate wallets.
2. Selected by institutional investors
Centralized exchanges are favored by institutional investors. To protect their assets, they choose platforms that follow KYC and AML procedures.
CEXs enjoy better liquidity since they are capable of providing their services to investors with large amounts of cryptocurrencies. Plus, they are generally used by a larger number of traders.
Still, CEXs also have their shortcomings:
1. Regulation burden
Before starting the trading experience you are asked to go through AML and KYC requirements. It means you have to provide sensitive personal information to the company you might not trust.
2. Lack of transparency
Centralized crypto exchanges do not disclose their trading processes and fees completely, so there is a lot of uncertainty as to what you will end up paying and how long you’ll wait for the transaction to complete.
3. Risk of fund loss
Large exchanges are often targets of hackers and fraudsters that can steal your assets. And with full control over your coins in the hands of the exchange, there is no way you can influence that.
Advantages and Limitations of DEXs
The disadvantages of CEX led to the appearing of DEXs on the market. The main advantages of decentralized exchanges are the following:
1. No surrendering of sensitive information
Since there is no KYC or AML, you do not need to verify your identity and, in some cases, even create an account to swap coins.
2. Lower fees
The lack of regulation allows decentralized exchanges to lower the transaction cost. Some of them even have zero fees.
3. Possession of assets
DEXs do not store any of your assets, so you stay in control of your cryptocryptocurrencies. This means your assets are well protected from hackers, too.
However, there are also limitations:
1. No insurance
Since you are the sole custodian of your assets, you are the only one responsible for their safety. The exchange platform does not offer any insurance in case your funds are lost.
2. Less user-friendly
As a rule, DEXs offer a more complex user interface. For newcomers in the crypto world, it may seem a little complicated.
3. Lower liquidity
DEXs cannot provide the same level of liquidity as CEXs.
Where to Convert ZEC to ETH: CEX vs DEX
If you are wondering which type of exchange to choose to convert ZEC to ETH, you should determine what you need the most. Afterwards, return to the section on advantages and see which matches your needs better.
If you have not had any experience with cryptocurrencies, you should probably go with one of the CEX platforms. But if you do not like the idea of compromising your privacy, DEX is definitely for you.