Centralized Exchange (CEX)

What Is A Centralized Exchange (CEX)?

A centralized exchange is a crypto trading platform owned and operated by a third party. Its goal is to facilitate the exchange of cryptocurrencies and tokens using an order book.

On a CEX, users have to sign up and verify their identity. They also do not control the crypto assets they hold on the exchange since they do not own the wallets’ private keys. However, they are popular with many users due to their convenience, low prices, and ease of use compared to a decentralized exchange (DEX).

Regulated Vs. Unregulated Centralized Exchanges

When it comes to exchanges, not all of them are the same. Some are regulated, and others are unregulated. Some may opt to use an unregulated exchange because it often means a lower entry barrier. In short, users do not have to go through a complex KYC process. All they need is an email address, a username, and a password to begin trading.

With a regulated exchange, the requirements are more stringent. Users must provide personally-identifying information in line with the regulator’s requirements. Besides that, these exchanges may not allow users to deposit funds from specific regions or countries around the world.

While it might be tempting to use an unregulated exchange, it is best to use a regulated platform. With a regulated platform, if anything goes wrong, there is a chance for legal redress. On the other hand, an unregulated platform makes it harder to recover funds if the owner decides to close the exchange and walk away with the funds, as was the case with QuadrigaCX.

Benefits of a Centralized Exchange

One of the benefits of using a centralized exchange is the high trading volumes. For instance, if X places an order for Bitcoin (BTC) worth $10, the order will likely be complete in minutes on a large centralized exchange. However, if they use a decentralized exchange, volumes might be too low, and it could take a long time to complete an order.

Another benefit of using centralized exchanges is that they often feature educational material. This information could be in e-books, videos, and even webinars. These educational materials are helpful to newbies catching up with the fast-moving nature of crypto filled with jargon.

For institutional investors, centralized crypto exchanges are a great option. Due to the strict legal requirements imposed on large institutions, they can only invest in the crypto sector via such exchanges. Besides, the volumes at which they enter the cryptocurrency market might not be suitable for a small, decentralized exchange.

Finally, centralized exchanges offer investment tools. These tools could be in the form of charts and live market data. The goal is to help investors make accurate and timely decisions to boost profitability. Centralized exchanges provide their centralized exchange crypto as well. For example, Binance offers BNB and BUSD. By paying fees with these you can avail a 20% discount as well.

Best Centralized Exchanges

We have compiled a list of the best centralized exchanges in terms of their trading volume, available cryptocurrencies, and supported fiat. Every centralized exchange has its own advantages so have a look at all of them.

        Name                  Trading Volume         Available Crypto         Fiat

  • Binance               $10,485,778,685                   600+                   46
  • FTX                       $1,553,639,570                     300+                  10
  • Coinbase             $1,327,436,405                     3k+                      3
  • Kraken                 $463,382,151                        191                      7
  • KuCoin                 $815,641,625                        600+                   48
  • Gemini                 $121,226,415                        100+                     7
  • Gate.io                 $580,665,365                        1200+                 2

Summary

The only downside to centralized exchanges is that they might list fewer coins. This is because top exchanges take time to assess a coin before making it available to traders on their platform. Besides, these exchanges go against the ethos of decentralization on which the crypto sector was founded.

Josh Fernandez

Josh Fernandez

20-something Non-giver of ETH.

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