Centralized exchanges (CEX)
A centralized exchange functions similarly to traditional brokerages or stock markets. The exchange is owned and operated by way of a centralized authority that maintains complete control over every account and people account's transactions. All transactions with a centralized exchange has to be approved by the exchange; this requires that every users place their rely upon an exchange operators' hands.

Advantages
Liquidity: Liquidity of your asset refers to its capability to be sold without causing much price movement and minimum lack of value. Liquidity is crucial to ensure safety against market manipulation, for example coordinated "pump-and-dump" schemes. Centralized exchanges can have greater liquidity kinds of exchanges.
Recovery possible: Most centralized exchanges provide the benefit for having the ability to verify a users' identity and recover usage of their digital assets, should the user lose or misplace their login credentials.
Speed: Transaction speed matters for sure categories of cryptocurrency traders; it's very important in high-frequency trading, where milliseconds count. Depending on an analysis by bitcoin.com, when compared with other types of exchanges, centralized exchanges handle transactions faster, by having an average speed of 10 milliseconds.

Disadvantages
Honeypot for hackers: Centralized exchanges have the effect of huge amounts of trades per day and store valuable user data across centralized servers. Hackers prefer them over other kinds of cryptocurrency trading platforms for that reason alone - essentially the most notorious hacks have been aimed at centralized exchanges, including Mt.GoX, BitFinex, and Cryptopia.
Manipulation: Certain centralized exchanges have already been charged with manipulating trading volume, participating in insider trading, and performing other acts of price manipulation.

Decentralized Exchanges (DEX)
Unlike centralized exchanges, decentralized exchanges (also called a DEX) become autonomous decentralized applications running on public distributed ledger infrastructure. They allow participants to trade cryptocurrency with no central authority.
Centralized exchanges in many cases are limited to participants within certain jurisdictions, require licensing, and have participants to verify their identity (KYC: "know your customer"). In comparison, decentralized exchanges are fully autonomous, anonymous, and lacking those same requirements. Several decentralized exchanges exist today, which we are able to categorize into three types: on-chain order books, off-chain order books, and automated market makers.

Advantages
Custody: There's a famous saying in distributed ledger communities, "Not your keys, not your crypto.": digital assets and cryptocurrencies belong to whoever possesses the keys to a forex account that holds those digital assets. As DEXs are decentralized, no single entity owns them, users control their private keys along with their digital assets.
Security and privacy: Since users are certainly not required to undergo KYC to make an account on the decentralized exchange, users may be more confident the privacy is preserved. Regarding security, most DEXs employ distributed hosting and take other security precautions, thereby minimizing the risk of attack and infiltration.
Trustless: A users' funds and private data are under their very own control, as nobody except you can access that information.

Disadvantages
Low liquidity: Even top decentralized exchanges have trouble with liquidity for sure digital assets - lower liquidity makes it much simpler to overpower markets on the decentralized exchange.
Blockchain interoperability: Trading or swapping two digital assets that you can get for a passing fancy distributed ledger is a relatively simple procedure employing a DEX; trading two digital assets available on two different distributed ledgers can show incredibly challenging and wish additional software or networks.

Hybrid Exchanges
A hybrid exchange combines the strengths of both centralized and decentralized exchanges. It facilitates the centralized matching of orders and decentralized storage of tokens - this means a hybrid exchange cannot control a users' assets and possesses no chance to stop someone from withdrawing funds. Simultaneously, an easy centralized database manages order information and matching trades as opposed to using potentially slow blockchain infrastructure.

Advantages
Closed ecosystem: A hybrid exchange can work in a closed ecosystem. Organizations can tell of the privacy of their information while taking advantage of blockchain technology.
Privacy: Private blockchains are primarily utilized for privacy-related use cases in substitution for limiting communication together with the public. A hybrid exchange can look after a company's privacy while still allowing it to speak with shareholders.

Disadvantages
Low Volume: Hybrid exchanges just have been known for a short moment. They just don't yet hold the necessary volume for being go-to platforms for getting and selling digital assets. Low volume brings about a simple target for price manipulation.
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