CEX (Centralized Exchange) is an organization that facilitates the exchange of cryptocurrency assets. It is owned and run by a central authority figure or company in a centralized manner.

CEX vs. DEX

A CEX acts as a trusted intermediary between buyers and sellers, similar to a traditional stock brokerage. When you deposit cryptocurrency onto a CEX, you are entrusting them with custody of your funds. They manage the internal ledgers, order books, and transactions. The main advantages of a CEX are its user-friendly interface, high liquidity, and the ability to easily convert between fiat-currency and crypto.

This model stands in contrast to a Decentralized Exchange (DEX), which operates without a central authority. On a DEX, all trades are executed automatically on the blockchain through smart-contracts, and users maintain full control over their funds in a non-custodial wallet. While a DEX aligns with the core principles of decentralization, CEXs often offer a simpler and more familiar experience for new users.

Why It Matters

CEXs play a crucial role as a primary gateway for people entering the crypto space from the traditional financial system. They provide a high degree of user-friendliness, customer support, and regulatory compliance (like KYC), which are often lacking in decentralized platforms. However, the convenience of a CEX comes with the risk of a single point of failure and the user's reliance on a third party to hold their assets.