Centralized Exchange (CEX)
What Is a Centralized Exchange (CEX)
A centralized exchange (CEX) is a platform managed by a single organization or entity that facilitates the trading of cryptocurrencies. The single organization/entity oversees all operations, such as processing transactions, matching orders, and managing user accounts. These exchanges act as intermediaries between buyers and sellers, providing a user-friendly interface and features to facilitate trading. They work similarly to traditional financial exchanges, offering a marketplace for digital assets. Examples include Flipster, Binance, Coinbase, OKX, Bybit, Kraken, and so on.
To use a centralized exchange, users must create an account and provide personal information for identity verification to comply with regulations (Know Your Customer (KYC) and Anti-Money Laundering (AML)). Users deposit funds into their exchange account using traditional currency or other cryptocurrencies, which the exchange holds in its own custodial wallets. Users can then place buy or sell orders for cryptocurrencies. The exchange matches these orders from its order book, executes the trade when a match is found, and updates the users' balances. Users can also withdraw their funds to personal wallets or convert cryptocurrencies back to traditional currency if needed.