What are you actually trading on a centralised exchange versus a DEX?
Crypto runs two entirely different market structures side by side, quoting the same assets. They are not variations on a theme. They price differently, settle differently, fail differently, and produce different data.
The centralised exchange — a database with a matching engine
A centralised exchange (CEX) works the way you would expect any electronic market to work: a central limit order book, price-time priority, an off-chain matching engine, microsecond latency, maker and taker fees.
The part that has no equity-market analogue is what you own. When you deposit, the coins move to the exchange's wallet and your balance becomes a database entry — a claim on the exchange, not the asset. Trading updates the database; nothing touches the blockchain until you withdraw. This is why a CEX can be fast and cheap, and it is also why the failure of a venue has repeatedly meant the loss of customer assets. In traditional markets, the exchange, the clearing house, the custodian and the market maker are separate, regulated entities. A crypto exchange has often been all four at once, sometimes with its own issued token on the balance sheet.
The decentralised exchange — a formula holding inventory
A DEX is a program on a blockchain. The dominant design is the automated market maker (AMM), and the classic version prices by a constant-product rule:
x × y = k, where x and y are the two token balances in the pool.
There are no quotes and no order book. The price is whatever the inventory ratio implies, and your trade moves that ratio.
Worked: what "price impact" means in a pool
A pool holds 100 ETH and 300,000 USDC. So k = 100 × 300,000 = 30,000,000 and the marginal price is 300,000 / 100 = $3,000.
Buy 1 ETH: the pool must hold 99 ETH, so USDC must become 30,000,000 / 99 = 303,030. You pay $3,030 — about 1.0% above the quoted price.
Buy 10 ETH: the pool must hold 90 ETH, so USDC must become 30,000,000 / 90 = 333,333. You pay $33,333 for 10 ETH, an average of $3,333 — 11.1% above the pre-trade price. The pool's marginal price is now $3,704.
Ten times the size, eleven times the impact. Depth is the whole story, and on a DEX depth is a published number you can read directly out of the pool — which is genuinely more transparent than any order book, and genuinely more punishing if you ignore it. (Fees are omitted above for clarity; real pools charge one.)
The other DEX-specific costs
- Gas. Every trade is a transaction with a network fee that does not scale with your size — which makes small trades disproportionately expensive.
- Block-time granularity. Your fill happens when a block is produced, not when you click.
- Public order flow. Your pending transaction is visible before it executes, which enables sandwiching and other extraction (MEV). Setting a slippage tolerance is not optional; it defines how much extraction you have pre-authorised.
Where each one dominates
For major assets, CEX order books still carry the large majority of volume and the tightest spreads. DEXs dominate for long-tail tokens that no centralised venue lists, and for anyone unwilling to hold a claim on an exchange. The result is that liquidity in the same asset lives in several structurally different places at once — which is the subject of the next lesson.
This is a description of market plumbing, not a recommendation of any venue or venue type.
In the data
A month of bitcoin's daily turnover, as a market-data feed reports it:
That series names no venue. It is one aggregated figure standing in for hundreds of independent books, and every crypto pair in this data is filed under a single virtual "exchange" with no country (1,867 of 1,868 pairs, 29 September 2026). Nothing in it distinguishes an order book from a pool, and pool reserves, the one number that actually determines execution on a DEX, appear nowhere in it.
Try it now
- Read a typical day off the chart above. That figure is a dollar amount, not a count of coins — a distinction that has embarrassed more than one comparison table.
- Using the constant-product arithmetic above, work out how large a trade a $30m pool absorbs before it moves the price 1%.
- Compare the two numbers. How much of a normal day's volume could a single pool of that size actually handle without visible impact? The answer is the reason a DEX and a CEX are not two ways of doing the same thing at the same size.