CEX DEX and custody

EN source master · P01-L06 · 30 minutes estimated · needs_review

Read-only study. No wallet connection, real money, seed phrase, private key, signature or live trade. Duration is an editorial estimate; visual assets are specifications, not deployed components.

‘Exchange’ names a service category, not one trust model. An account balance, a wallet balance and a pool position can expose a user to different actors and rules.

Separate custody from execution

Custody asks who can authorize movement and under what conditions. Execution asks how a proposed exchange is matched or priced and settled. A centralized venue may keep an internal balance for a customer while controlling the underlying signing infrastructure. That model is stipulated in this lesson's CEX case; it should not be projected onto every product without inspecting its terms and design.

A DEX may execute through contracts and liquidity pools; Uniswap's overview describes that mechanism [UNI]. A web interface is not the entire protocol. Conversely, a contract path does not remove every dependency. Code behavior, permissions, routing, interfaces and data sources still matter.

Follow the asset and permission path

For each stage ask: where is the balance recorded, what authorizes movement, who can stop processing, and what evidence shows completion? An internal venue fill may not create a separate public-chain transaction for that customer. A withdrawal record answers a different question from an internal trade record.

For a wallet-mediated contract interaction, distinguish the account's authority from the spender or contract it permits. Ethereum account rules explain the existence of key- and code-controlled accounts [ACCT]; they do not authenticate a particular exchange or prove how many humans control it.

Compare failures, not slogans

In the fictional CEX, a withdrawal pause can block outward processing even while internal records remain visible. In the fictional DEX, an unavailable interface may block that interface's workflow without proving the underlying contracts stopped. Neither case justifies trying another site or sending funds in this exercise. Record the missing technical or service evidence instead.

Build a bounded comparison

Use a matrix rather than a single safety label. Include authorization, execution method, completion evidence and residual dependencies. An audit report, if supplied, would have a version and scope; absence of a visible problem is not proof of solvency or correctness. The comparison is for understanding assumptions, not recommending a platform.

Evidence-state classification

OBSERVED in the fixture: custody/execution assignments, withdrawal pause and interface unavailability. INFERRED: the dependency comparison under the stated models. UNKNOWN: actual solvency, losses and contract health. INSUFFICIENT EVIDENCE: either operational interruption proves loss or either model guarantees universal safety.

• CEX: centralized exchange, operated by a service provider.
• DEX: decentralized exchange, with execution governed by protocol rules such as smart contracts.
• Custody: authority over asset movement.
• Internal ledger: service-maintained customer records.
• Pool: contract-held exchange inventory.
• Settlement evidence: records supporting completed movement.

ILLUSTRATIVE. VENUE-C keeps balances internally and alone authorizes withdrawals; it matches orders internally. ROUTE-D uses user-authorized contracts and a pool containing TOKEN-A/TOKEN-B; its interface is operated by WEB-D. At T1 VENUE-C reports withdrawals paused; WEB-D is unavailable. No solvency or contract-health records are supplied.

Custody and execution comparison: C internal ledger and separate withdrawal boundary; D TOKEN-A/TOKEN-B pool and separate WEB-D interface boundary. Alt: internal matching and pool execution have distinct authorities and evidence.

The fictional custody/execution distinctions and reported availability conditions.

Solvency, recoverability, absence of vulnerabilities or a platform recommendation.

• Calling every interface failure a chain failure.
• Equating a visible internal balance with a public receipt.
• Declaring noncustodial execution risk-free.

Create the four-column comparison. Does either T1 observation establish lost assets? What next evidence would answer processing versus solvency versus contract availability?

Submit a short evidence table and reasoning, using only the provided material. Suggested allocation: study 12 min, inspection/calculation 8 min, correction/quiz 10 min.

• Identify movement authority.
• Identify execution location.
• Name completion evidence.
• Separate availability from solvency.

‘Exchange’ names a service category, not one trust model. An account balance, a wallet balance and a pool position can expose a user to different actors and rules. The supplied material supports the fictional custody/execution distinctions and reported availability conditions. It does not establish solvency, recoverability, absence of vulnerabilities or a platform recommendation.

• Compare who authorizes transfers and who executes trades.
• Separate exchange-interface access from custody.
• Record residual dependencies without universal rankings.

P01-L07 after reviewing this exercise and its prerequisites.

NONE. The authoritative catalog requires no product access for this lesson. Use the frozen/offline material.

• [UNI] Uniswap protocol overview — Pool-based exchange through smart contracts; mechanism only. Checked 2026-10-01.
• [ACCT] Ethereum accounts — Accounts and signing authority, separate from wallet interfaces and human identity. Checked 2026-10-01.

Synthetic values are author-created exercise inputs. Historical values, if any, must use the linked dataset and its narrower provenance. Source inspection is not independent editorial acceptance.