What is a CEX (Centralized Exchange)? Everything you need to know

CEX (Centralized Exchange) is a familiar keyword to those who are learning about the cryptocurrency market. These are centralized exchanges, acting as an intermediary connecting buyers and sellers of cryptocurrencies.

Do you really understand how it works and what to keep in mind when using CEX? Let’s explore CEX in detail with AZCoin and the top 5 most famous exchanges in 2024 to make wise investment decisions.

What is a CEX (Centralized Exchange)?

CEX exchanges are centralized cryptocurrency trading platforms, operated by a single organization or company. These exchanges not only provide services for buying, selling and exchanging cryptocurrencies, but also perform monitoring and management activities to ensure that transactions are carried out safely.

When users deposit funds into an account at the exchange, this account will manage and protect their funds. CEX exchanges use an order book system to set prices, similar to traditional banks.

How CEX exchange works

Most CEXs operate on an order book basis. Users place orders to buy or sell assets at a desired price. The spread creates market depth, which helps determine the prevailing market price.

When someone else buys or sells at that price, your order is matched and the trade is executed. Additionally, Centralized Exchange can also act as market makers, providing liquidity to trading pairs to improve trading speed.

Advantages and disadvantages of CEX exchange

Advantages

• Ease of Use: Centralized Exchange exchanges often provide an easy-to-use user interface, similar to traditional stock exchanges, making it easy for new users to get acquainted and trade.
• High liquidity: Due to the concentration of a large number of users, CEX exchanges often have high liquidity, helping you to make transactions quickly and easily.
• Many trading pairs: CEX exchanges offer a variety of trading pairs, including popular cryptocurrencies and altcoins.
• High security: CEX exchanges often have professional customer support teams and security measures such as 2FA, helping users to quickly resolve problems and protect their accounts.
• Diverse features: In addition to trading, many CEX exchanges also provide additional services such as staking, lending, margin trading, helping users diversify their investment portfolio.

Disadvantages

• Security risks: Due to the concentration of assets, CEX exchanges are vulnerable to cyber attacks. If the exchange is hacked, users may lose their assets.
• KYC requirements: CEX exchanges often require users to complete a KYC process, which can raise privacy concerns and require users to provide personal information.
• Transaction fees: Centralized Exchange exchanges often charge higher transaction fees than DEXs, especially when withdrawing or converting between assets.
• Dependence on intermediaries: Trading on CEX exchanges depends on the operation of intermediaries, which can lead to service disruptions or difficulties in executing transactions when the exchange experiences problems.

Difference between DEX and CEX

• How it works: DEX uses smart contracts instead of a third party like CEX. This makes trading more automated and transparent.
• Control of assets: Users on DEX have full control over their assets, while on CEX, assets are managed by the exchange.
• Security: DEX doesn’t require personal information, which helps protect users from the risk of being hacked or exposed.
• Liquidity: CEXs typically have larger trading volumes and higher liquidity than DEXs. This allows investors to make large trades without liquidity issues.
• Transaction Fees: DEXs have lower transaction fees because they don’t require a third party. CEXs typically have higher transaction fees but may offer customer support.
• Ease of use: Centralized Exchange are typically easier to use because the interface resembles traditional stock exchanges. DEXs can be confusing for beginners with concepts like gas fees and slippage.

Top 5 Famous CEX exchanges in 2024

Below are the top 5 famous CEX in 2024 that you can refer to:

Binance

Binance is the world’s largest cryptocurrency exchange by trading volume. Founded in 2017, Binance has quickly become a leading platform in crypto space thanks to its wide range of financial products and services.

By 2024, Binance had a daily trading volume exceeding $1 billion and served over 25 million users globally. The exchange is notable for its low trading fees, support for over 500 cryptocurrencies and services ranging from spot trading to futures and staking.

Coinbase

As one of the leading cryptocurrency exchanges in the US, famous for its user-friendly and easy-to-use interface for beginners. Launched in 2012, Coinbase now has more than 98 million users and a daily trading volume of about $500 million.

This exchange not only provides cryptocurrency trading services but also supports secure storage and cryptocurrency securities trading services for institutional investors. Coinbase was also the first exchange to be listed on the NASDAQ stock exchange.

Kraken

This is a US-based cryptocurrency exchange that is known for its high security and sophisticated trading features. Founded in 2011, Kraken serves over 9 million users and has a daily trading volume of around $400 million. 

It offers spot trading, futures and staking, along with support for a wide range of digital assets. Kraken is also known for its strong security features and advanced market analysis tools.

Huobi

Huobi is one of the leading cryptocurrency exchanges in Asia, featuring comprehensive financial services and attractive promotions. Launched in 2013, Huobi now has a daily trading volume exceeding $700 million and serves millions of global users. 

It offers spot trading, futures trading and other financial services and supports a wide range of cryptocurrencies. Its significant presence in Asia contributes to its frequent mention in AZcoin – best crypto exchange 2024.

Bitfinex

Bitfinex is a cryptocurrency exchange known for its advanced trading services and large liquidity. Founded in 2012, Bitfinex now has a daily trading volume exceeding $300 million and serves millions of users worldwide. 

It offers spot, margin and futures trading, along with advanced technical analysis tools and the ability to trade with high leverage.

Some notes when trading on Centralized Exchange exchange

Below are some important notes when trading on the Centralized Exchange:

• Make sure the exchange uses advanced security measures like two-factor authentication, data encryption and secure account management.
• Understand the exchange fee structure, including deposit, withdrawal and transaction fees.
• Make sure the platform has multilingual support and offers quick solutions in case of problems.
• Use risk management tools such as stop-loss and take-profit orders to protect your investment capital.
• Regularly update software updates and patches to protect your account and personal data.

Conclusion

Hopefully, the above article has helped you better understand the difference between DEX and CEX exchanges. Each type of exchange has its own advantages and disadvantages and the choice between them depends on your personal needs and preferences. Thank you for following the AZcoin article and wish you success in your cryptocurrency transactions!