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Many out of crypto don’t understand that there are 2 sides to this crypto coin - the centralized side, and the decentralized side. Specifically, centralized exchanges and self-custodied wallets/decentralized exchanges.

These 2 sides are completely different, and one often gets blamed for the mistakes of the other. We’re here to clear up this misconception once and for all.

🔍 A Short Synopsis

In the ever-evolving landscape of cryptocurrency, two primary types of exchanges dominate the scene: Centralized Exchanges (CEXs) and Decentralized Exchanges (DEXs). But while CEXs and DEXs jostle for dominance, the only sure winner is the one who remembers to keep their digital wallet's password.

🏢 Centralized Exchanges: The Traditional Titans

CEXs, like Binance or Coinbase, are the familiar faces in the crypto exchange world. They act as middlemen in trades, holding users' funds and offering services like customer support, user-friendly interfaces, and enhanced security measures.

• Controlled & Regulated: They are operated by specific companies, complying with financial regulations.

• User Trust: Users entrust their private keys to the exchange, which handles security and transactions.

• Fiat Gateway: CEXs often provide a bridge between fiat and crypto, allowing users to buy crypto with traditional currencies.

• Speed and Efficiency: They can process transactions quickly due to centralized control.

• Liquidity: High trading volumes on CEXs usually mean better liquidity.

🚀 Decentralized Exchanges: The Autonomous Alternatives

DEXs like Uniswap or Osmosis, are the mavericks of the crypto world. They operate on blockchain technology, allowing peer-to-peer trading without the need for an intermediary.

• Autonomy & Anonymity: Users have control over their private keys and trade directly with others.

• No Fiat Gateway: Typically, DEXs don't support fiat currencies. It's all about crypto-to-crypto trading.

• Smart Contracts: Trades are executed through smart contracts, automated agreements on the blockchain. This reduces costs and increases speed.

• Security: Reduced risk of hacks and no central point of failure.

• Liquidity Pools: DEXs often use liquidity pools instead of traditional market-making methods.

🔥 The Heat of the Debate

The choice between CEXs and DEXs often boils down to a trade-off between convenience and control. CEXs offer a more user-friendly, controlled environment, often with more trading options and higher liquidity. DEXs, on the other hand, appeal to those valuing decentralization, privacy, and complete control over their assets.

🔮 The Future Awaits

As the crypto universe expands, both CEXs and DEXs continue to evolve. We might see a future where the lines blur, with CEXs adopting decentralized features and DEXs improving user experience and accessibility.

🔑 Self-Custody: The Cornerstone of Crypto Control

In the realm of cryptocurrency, navigating the waters of centralized (CEXs) and decentralized exchanges (DEXs) brings us to a pivotal concept: self-custody.

Self custody of your crypto is like having cash in your wallet instead of keeping your money in the bank. In one sense, you have literal cash in your own pocket. You have 100% of it. You have control of that cash.

When your money is at a bank, you don’t have that cash. You don’t have physical control of it. In fact, your money doesnt even stay at the bank where you deposit it. The bank loans it to someone else and keeps 99% of the interest earned. They simply give you an IOU for that cash, promising that you can have the equal amount if you come in and request it.

Here's how it ties in with the world of crypto:

• CEX’s: When you hold your crypto on a centralized crypto exchange, like Binance, Kraken, Coinbase, FTX, Gemini, etc. all you have is an IOU from the exchange. Crypto needs to be held in a wallet, and in this case, the exchange holds the keys to the wallet that holds your, and all the other depositors coins.

• Self Custodied wallet: The other option is a self-custodied wallet. You can send your crypto from the exchange to a wallet that you own. One where you hold the keys. You are in complete control, and you have the key to access those coins on the blockchain and do with them whatever you’d like,

Many of the crypto hacks and losses that you see in the news are blamed on the underlying technology - when in reality, they’re the fault of humans and centralized companies. Two of the most noteworthy are the Quadriga CX Incident and the more recent FTX fraud.

Embracing Self-Custody

• True Ownership: Self-custody means holding your own private keys. You’re not just an entry in an exchange's database; you’re the direct holder of your assets.

• Security and Autonomy: Holding your own keys means unparalleled security and control. Your crypto is accessible only by you, eliminating risks associated with exchange control.

• Aligning with Crypto Ethos: Self-custody reflects the original vision of cryptocurrencies - decentralization and empowering individuals.

Decentralized Exchanges

Still looking to trade your crypto while holding it in a self custodied wallet? Well, you can send back to the centralized exchange, make your trade, and then send back to your wallet… or you can simply use a decentralized exchange.

Connect your self-custodied wallet with the Dapp and you can interact and trade your crypto directly on-chain, without having to send it anywhere or relinquish any control.

🔐 The Bottom Line

Self-custody in crypto isn’t just a feature; it’s a fundamental aspect of digital asset ownership. True power and independence in the crypto world are rooted in holding your keys.

• Empowerment: Self-custody empowers you with full control over your crypto assets.

• Responsibility: With great power comes great responsibility. Self-custody demands a higher level of personal security awareness.

Remember: "Not your keys, not your coins." In the rapidly evolving crypto landscape, embracing self-custody is embracing the essence of financial freedom in the digital era. 🚀

That’s all for today! Have a great weekend and don’t hesitate - self-custody your coins TODAY.

Thank you for reading Make Crypto Simple.

Sincerely,

Chris Schawel


^{The content provided in this newsletter is for entertainment purposes only and should not be construed as financial advice. All information, including but not limited to market analysis, price predictions, and investment strategies, is purely speculative in nature. We strongly recommend conducting your own research and consulting with a qualified financial advisor before making any investment decisions. We are not responsible for any losses incurred as a result of the information presented in this newsletter.}