A centralized exchange (CEX) is an organization that coordinates large-scale cryptocurrency trading, using a similar business model to traditional asset exchanges such as stock exchanges.
In essence, exchanges are markets. They are advantageous when many people are trying to buy and sell the same item simultaneously. Famous stock exchanges in conventional economics include the New York Stock Exchange and the London Metal Exchange. In the cryptocurrency industry, major CEXs include Binance, Coinbase, Gemini, and Kraken.
Some popular CEXs. Image: CoinCulture
By “clearing” transactions, centralized crypto exchanges engage directly with the markets. Typically, they maintain digital order books, which are lists of open buy and sell orders. They connect buyers and sellers and publish current market values based on an asset’s most recent sale price.
CEXs often charge a bit higher fees than their decentralized counterparts, but they are generally more secure and user-friendly. For example, with an instant buy/sell fee of 1%, exchanges such as CoinSpot allow users to buy cryptocurrency instantly at the current market price. However CoinSpot Fees are a bit high, users can trade over 360 cryptocurrencies and enjoy all the fantastic benefits like high security features and 24/7 customer support.
According to a report 2021 by global accounting firm KPMG, exchanges are the most valuable businesses in the crypto industry.
CEXs are still much more common than decentralized exchanges (DEX) in February 2022. KPMG found that they account for around 95% of the crypto exchange trade. Binance, a popular centralized crypto exchange, also opened its DEX. The centralized exchange Binance carries out more than $20 billion in daily transactions, while the largest DEX, Uniswap, processes less than $2 billion.