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How Does a Decentralized Exchange (DEX) Differ from a Centralized Exchange (CEX) in Risk Profile?

CEX has custodial and counterparty risk; DEX eliminates custodial risk but introduces smart contract, oracle, and impermanent loss risk.
Greeks.Live22.11.25

How Does a Decentralized Exchange (DEX) Differ from a Centralized Exchange (CEX) in Risk Profile?

A CEX holds user funds and acts as the counterparty, posing custodial and traditional counterparty risk. A DEX uses smart contracts for non-custodial trading, eliminating custodial risk but introducing smart contract vulnerability, oracle, and impermanent loss risk.

The risk is shifted from a centralized entity to the code itself. Users retain control of their private keys on a DEX.

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