A centralized exchange (CEX) is a type of cryptocurrency exchange that operates in a centralized manner, meaning that it is controlled and managed by a central authority or company.
In a CEX, the exchange acts as an intermediary between buyers and sellers of cryptocurrencies, and it holds users’ funds in custody on their behalf. This means that users must trust the central authority to securely hold and manage their funds, as well as to facilitate transactions in a fair and transparent manner.
Centralized exchanges typically offer a range of trading pairs and advanced trading features, such as margin trading, futures trading, and options trading. They also typically have higher trading volumes and liquidity than decentralized exchanges, which can make it easier and faster to execute trades.
However, centralized exchanges are also vulnerable to security risks and hacks, as a successful attack on the central authority can potentially result in the loss of users’ funds. Additionally, centralized exchanges can be subject to government regulations and censorship, which can limit their availability and functionality in certain regions or for certain types of transactions.
Some examples of popular centralized exchanges in the cryptocurrency space include Binance, Coinbase, and Kraken.