A Centralized Exchange (CEX) is a cryptocurrency trading platform operated by a single entity or company that facilitates the buying, selling, and trading of digital assets like Bitcoin, Ethereum, and various tokens. Unlike decentralized systems, a CEX acts as an intermediary, holding custody of users’ funds in its own wallets after users deposit their cryptocurrencies or fiat money (e.g., USD). It manages trades through a centralized order book, matching buy and sell orders to ensure liquidity, often acting as a market maker itself. Examples include Binance, Coinbase, and Kraken.
A CEX offers a user-friendly interface, high transaction speeds due to off-chain processing, and additional features like fiat on-ramps, margin trading, and customer support, making it appealing to beginners and professional traders alike. However, it requires users to trust the exchange with their assets, subjecting them to risks like hacks (e.g., past incidents like Mt. Gox), regulatory actions, or account freezes. To mitigate risks, reputable CEXs implement security measures such as two-factor authentication (2FA), cold storage for most funds, and sometimes insurance. They also typically enforce Know Your Customer (KYC) requirements to comply with regulations, reducing user privacy but aligning with legal frameworks. A CEX provides convenience and efficiency at the expense of full decentralization and user control.
Video Explanations:
What is CEX? Short review centralized crypto exchange
What are Centralized Cryptocurrency Exchanges & How Do They Work ?
Centralized Cryptocurrency Exchanges: Explained
What is a Centralized Crypto Exchange?
