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How Do Centralized Exchanges Differ from Decentralized Exchanges in Terms of Security Risks?

CEXs face custodial 'honeypot' risks, while DEXs face smart contract vulnerabilities and user-side private key risks.
Greeks.Live19.11.25

How Do Centralized Exchanges Differ from Decentralized Exchanges in Terms of Security Risks?

Centralized Exchanges (CEXs) hold user funds in custodial wallets, making them a single, high-value target for hackers (the 'honeypot' risk). Decentralized Exchanges (DEXs) operate via smart contracts and users retain control of their private keys, mitigating the honeypot risk.

However, DEXs are vulnerable to smart contract exploits, front-running, and impermanent loss, which are different security and financial risks than those faced by CEXs.

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