# Do Decentralized Exchanges (DEXs) Handle Liquidations Differently than Centralized Exchanges (CEXs)? ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

---

## Do Decentralized Exchanges (DEXs) Handle Liquidations Differently than Centralized Exchanges (CEXs)?

Yes, the process is fundamentally different. On a CEX, the exchange itself acts as the liquidator, taking over and closing the position, often using an internal insurance fund.

On a DEX, the liquidation process is decentralized and permissionless. It is governed by a smart contract that allows any third-party user (a "liquidator bot") to identify an undercollateralized position, repay the debt on behalf of the borrower, and claim the collateral at a discount as a reward.

The process is more transparent but can be more chaotic and prone to issues like network congestion.

- [What Is the Primary Difference in Front-Running Mitigation between Centralized (CEX) and Decentralized (DEX) Exchanges?](https://learn.greeks.live/path/what-is-the-primary-difference-in-front-running-mitigation-between-centralized-cex-and-decentralized-dex-exchanges/)

- [What Role Do External Liquidator Bots Play in Maintaining the Solvency of a DEX?](https://learn.greeks.live/path/what-role-do-external-liquidator-bots-play-in-maintaining-the-solvency-of-a-dex/)

- [What Are the Key Differences in Front-Running Prevention between CEXs and DEXs?](https://learn.greeks.live/path/what-are-the-key-differences-in-front-running-prevention-between-cexs-and-dexs/)

- [How Do Decentralized Exchanges (DEXs) Handle Bid-Offer Spreads Differently than Centralized Exchanges (CEXs)?](https://learn.greeks.live/path/how-do-decentralized-exchanges-dexs-handle-bid-offer-spreads-differently-than-centralized-exchanges-cexs/)

- [How Do Decentralized Exchanges (DEXs) Change the Dynamics of Crypto Arbitrage Compared to Centralized Exchanges (CEXs)?](https://learn.greeks.live/path/how-do-decentralized-exchanges-dexs-change-the-dynamics-of-crypto-arbitrage-compared-to-centralized-exchanges-cexs/)

- [How Do ‘Decentralized Exchanges’ (DEXs) Differ from ‘Centralized Exchanges’ (CEXs)?](https://learn.greeks.live/path/how-do-decentralized-exchanges-dexs-differ-from-centralized-exchanges-cexs/)

- [How Do Decentralized Exchanges (DEXs) Handle the Risk of a Black Swan Event Differently from Centralized Exchanges (CEXs)?](https://learn.greeks.live/path/how-do-decentralized-exchanges-dexs-handle-the-risk-of-a-black-swan-event-differently-from-centralized-exchanges-cexs/)

- [How Does a Centralized Oracle Handle Data Disputes?](https://learn.greeks.live/path/how-does-a-centralized-oracle-handle-data-disputes/)

## Glossar

### [Decentralized Exchanges](https://learn.greeks.live/area/decentralized-exchanges/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Access ⎊ These platforms offer permissionless entry to cryptocurrency and tokenized asset markets, democratizing capital deployment into novel financial structures.

### [Liquidations](https://learn.greeks.live/area/liquidations/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Trigger ⎊ Liquidations represent the forced closure of leveraged positions due to insufficient margin to cover adverse price movements, a critical event in cryptocurrency, options, and derivatives markets.

### [Centralized Exchanges](https://learn.greeks.live/area/centralized-exchanges/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Exchange ⎊ Centralized exchanges (CEXs) represent a critical infrastructure within cryptocurrency markets, facilitating order matching and settlement for a diverse range of digital assets, including options and derivatives.

## Discover More

### [Are There Any Regulatory Pressures Pushing DEXs towards Centralized Clearing Mechanisms?](https://learn.greeks.live/path/are-there-any-regulatory-pressures-pushing-dexs-towards-centralized-clearing-mechanisms/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Are There Any Regulatory Pressures Pushing DEXs towards Centralized Clearing Mechanisms?](https://learn.greeks.live/wp-content/uploads/2025/10/Macro-Analysis-of-Tokenized-Asset-Structure-Fluctuation-Indicating-Liquidity-Pool-Instability.webp)

Yes, global regulators concerned with systemic risk and investor protection may indirectly pressure DEXs toward centralized KYC/AML or clearing-like risk controls.

### [How Does a Decentralized Exchange (DEX) Handle Slippage Compared to a Centralized Exchange (CEX)?](https://learn.greeks.live/path/how-does-a-decentralized-exchange-dex-handle-slippage-compared-to-a-centralized-exchange-cex/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does a Decentralized Exchange (DEX) Handle Slippage Compared to a Centralized Exchange (CEX)?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Exchange-Liquidity-Pool-Mechanism-Focusing-on-Automated-Market-Maker-Configuration-Audits.webp)

CEX slippage is from order book depth; DEX slippage is from price impact on the liquidity pool's asset ratio.

### [How Does Slippage on Decentralized Exchanges (DEXs) Differ from That on Centralized Exchanges (CEXs)?](https://learn.greeks.live/path/how-does-slippage-on-decentralized-exchanges-dexs-differ-from-that-on-centralized-exchanges-cexs/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does Slippage on Decentralized Exchanges (DEXs) Differ from That on Centralized Exchanges (CEXs)?](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Alignment-Mechanism-Exemplifying-Decentralized-Finance-Derivative-Execution-Schematics.webp)

CEX slippage is from a lack of orders; DEX slippage is a built-in mathematical certainty based on trade size.

### [What Technical Solutions Do Centralized Crypto Exchanges (CEXs) Use to Mitigate High-Frequency Front-Running?](https://learn.greeks.live/path/what-technical-solutions-do-centralized-crypto-exchanges-cexs-use-to-mitigate-high-frequency-front-running/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Technical Solutions Do Centralized Crypto Exchanges (CEXs) Use to Mitigate High-Frequency Front-Running?](https://learn.greeks.live/wp-content/uploads/2025/10/Microcosm-of-Secured-Cross-Chain-Interoperability-Mechanisms-in-Decentralized-Finance-Layer-Solutions.webp)

CEXs use co-location, anti-spoofing, order book surveillance, and speed bumps to level the playing field.

### [What Features of Decentralized Exchanges (DEXs) Make Wash Trading Detection Difficult?](https://learn.greeks.live/path/what-features-of-decentralized-exchanges-dexs-make-wash-trading-detection-difficult/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Features of Decentralized Exchanges (DEXs) Make Wash Trading Detection Difficult?](https://learn.greeks.live/wp-content/uploads/2025/10/Symmetric-Quadrant-Deployment-Mechanism-Illustrating-Decentralized-Autonomous-Organization-Governance-Structure.webp)

Pseudonymous accounts, lack of centralized KYC/AML, and reliance on on-chain analysis for linking addresses to an entity.

### [How Do Centralized Exchanges (CEX) and Decentralized Exchanges (DEX) Differ in Managing Margin Shortfalls?](https://learn.greeks.live/path/how-do-centralized-exchanges-cex-and-decentralized-exchanges-dex-differ-in-managing-margin-shortfalls/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do Centralized Exchanges (CEX) and Decentralized Exchanges (DEX) Differ in Managing Margin Shortfalls?](https://learn.greeks.live/wp-content/uploads/2025/10/Xray-Visualization-of-Bifurcated-Digital-Asset-Settlement-Mechanisms-Leveraging-NonFungible-Token-Call-Options.webp)

CEXs use a centralized fund and fast off-chain engines, while DEXs use smart contracts and pooled liquidity with higher on-chain costs.

### [How Do Decentralized Exchanges (DEXs) Factor into Traditional Index Selection Criteria?](https://learn.greeks.live/path/how-do-decentralized-exchanges-dexs-factor-into-traditional-index-selection-criteria/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do Decentralized Exchanges (DEXs) Factor into Traditional Index Selection Criteria?](https://learn.greeks.live/wp-content/uploads/2025/10/Macro-Visualization-of-Hardware-Security-Module-Cryptographic-Key-Material-Securitization-Mechanism.webp)

DEXs challenge traditional criteria like central compliance and custody, requiring new metrics focused on smart contract security and verifiable on-chain data.

### [How Do Decentralized Exchanges Differ from Centralized Exchanges in the Context of Rug Pulls?](https://learn.greeks.live/path/how-do-decentralized-exchanges-differ-from-centralized-exchanges-in-the-context-of-rug-pulls/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do Decentralized Exchanges Differ from Centralized Exchanges in the Context of Rug Pulls?](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Finance-Mechanism-Representing-Atomic-Swap-Liquidity-Pool-Convergence-Under-Quantum-Entanglement.webp)

DEXs are more prone to token-based rug pulls due to their open listing, while CEXs can be a single point of failure.

### [Define 'Liquidity Pool' in the Context of Decentralized Exchanges (DEXs)](https://learn.greeks.live/path/define-liquidity-pool-in-the-context-of-decentralized-exchanges-dexs/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Define 'Liquidity Pool' in the Context of Decentralized Exchanges (DEXs)](https://learn.greeks.live/wp-content/uploads/2025/10/Decentralized-Exchange-Automated-Market-Maker-Mechanism-Aperture-Modulating-Volatility-Surface.webp)

A liquidity pool is a smart contract holding token pairs to enable decentralized trading and earn provider fees.

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