A centralized crypto exchange (CEX) is a trading application that matches up buyers and sellers and publishes current market prices based on the last trade made in a cryptocurrency. It maintains an orderbook, a collection of buy and sell orders posted by traders, and keeps traders’ assets in a centralized location using the same model as the stock exchanges.
Centralized exchanges are licensed companies with a physical presence and offices, employees, and other infrastructure. These exchanges are considered centralized because one private company oversees the deals and transactions and sets the commissions, fees and trading rules.
The centralized exchange also acts as a clearing counterparty. The exchange ensures that all obligations are met between seller and buyer and that the transaction completes successfully.
In a CEX you can deposit fiat currencies, such as EUR, USD, AUD, or JPY, while others allow you to deposit only cryptocurrencies. Whether it’s fiat or cryptocurrency, once deposited, they are under the custody of the exchange company.
The exchange company offer browser and mobile apps-based trading platforms and earns money when traders exchange cryptocurrencies. Usually, exchanges also offer crypto asset custody.
Traders have to open an account and connect the credit, debit card or bank account. The centralized crypto exchanges require all investors to verify their personal information before using the services provided by the exchange. If the user is a company, then it must provide corporate information for the process of verification.
Once the account is ready the investor can buy, sell or trade fiat to cryptocurrency and vice versa, they can also trade between two different cryptocurrencies. Most cryptocurrency exchanges allow investors to execute different types of orders such as market orders and limit orders, and the process works as it would with more traditional assets like stocks.
In the last two years, centralized crypto exchanges (CEX) offer extra financial products and services, such as products to earn interest by lending or staking cryptocurrencies. The exchange company offers customer support that can help answer questions and help with troubleshooting.
Centralized exchanges account today for almost 95% of the crypto trading volumes.
Examples of centralized platforms include Crypto.com, Coinbase, Binance, Poloniex, Bittrex, BitStamp and Kraken.
Nikolas has been involved in the finance industry for over fifteen years spanning across Europe and USA with a depth of knowledge and experience within many aspects of the financial markets. Nikolas gained several years experience with some of the Europe’s leading Brokers, as equity analyst, and trader managing accounts for both Private and Corporate Investors. He enjoys both the fundamental and technical aspects of trading focusing on stock markets and all FX majors. Currently, Nikolas provides analysis and comments to online financial publications. Educational background in Economics (BSc), and Finance (MSc).