All You Need to Know About Centralized Exchanges (CEX)

	Centralized exchanges, shortly referred to as CEX, are supported by online cryptocurrency trading platforms and companies that mediate exchanges and transfers between buyers and sellers.<br role="presentation" />

This exchange outlet is very popular among investors since it has cheaper crypto exchange fees. After all, it is the initial method of acquiring crypto. In fact, the most renown CEX platforms are: Binance, Coinbase, Kucoin and FTX. These companies that run CEX processes are what make
the exchanges centralized.

PS: Unlike DEX, CEX platforms might require you to add your KYC information because of their anti-money laundering policies which most of the time require identity verifications. Read more about a DEX in this article: Your Ultimate Guide to Decentralized Exchanges (DEX)

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		### 1. Currency conversions (Fiat to crypto and vice versa)

	Centralized exchanges do support fiat to crypto transactions, which means that you can buy<br role="presentation" />bitcoin for example with a fiat currency such as the USD.

		### 2. It has a considerable trading volume

	These platforms are highly liquid, making asset trading and exchanges easy to do at any time. It is also a fast way to transfer larger amounts of funds within a few minutes making it a good platform for experienced and busy traders. Binance for instance -a CEX platform- is not only user friendly, but it also registers more than $30B in daily trading.

		### 3. It is user friendly

	CEXs are very user friendly. If you are a newbie who’s still not very familiar with the crypto world, CEXs are a great starting point for you to look into. For example, Binance offers its users the option of simple and basic trades. It is a great place to start learning all about the crypto space. Traditional investors should also be familiar with the way CEX platforms work since they function pretty similarly to online broker platforms.

		### 4. It offers various useful features

	CEX platforms also offer features other than asset exchange, such as exchange staking, margin lending, crypto derivate trading and other considerable features.

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		## But How Does it Operate?

	Basically, CEX facilitates transactions by collecting orders and then using a software to matchup the corresponding orders that show the same price for a specific cryptocurrency to buy or to sell.

CEX users deposit their funds onto an exchange and the platform takes custody of these deposited assets. It later on issues an IOU to the trader in the same amount of funds that he deposited. The users can then proceed with the transactions that fit into their own orders.

There is one aspect of decentralization when it comes to using CEX: you do not have to go to a broker to place an order. Instead, your assets are kept in a wallet and you are free to move those assets into the exchange whenever you want to trade. The exchange tracks these trades and only converts them into fiat at the moment of fund withdrawals.

		## CEX Regulations

	Because centralized exchanges operate with billions of dollars deposited by millions of customers from all over the world, their institutions are usually authorized by their local government to provide their exchange services.<br role="presentation" />

This also explains why CEX is different than DEX when it comes to complying with regulations and some laws. These protocols that CEX usually complies to include: Know Your Customer, anti-money laundering, and counter-terrorism financing regulations. CEX institutions also adopt other procedures to execute the transactions transparently and to prevent any participants from changing asset prices.

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		## So what are the main differences between CEX and DEX?

		### 1. Transaction Execution

	All transactions that pass through CEX have to go through the exchange’s system. As you know by now, the system is what matches the buy and sell orders with the same prices. As for DEX transactions, they are automatically executed based on the smart contracts that have been established and that power the exchange.

		### 2. Data Storage

	CEXs handle their data by storing and managing them through their own infrastructure. They usually charge third parties for access to their data. DEX on the other hand record their data on the blockchain. This data is public and can be viewed by anyone.

		### 3. Market Making

	In a CEX, a market maker is a unit that provides liquidity to keep executing quickly all orders that flow through the exchange. DEX use Automated Market Maker, also known as AMM, that rely on a pool of tokens provided by third parties. 

		### 4. Transaction Costs

	Since DEX operates on blockchain, transactions would typically cost less than CEXs. However, CEX transactions would typically charge a fee for providing their services because they are a for-profit private entity.

		### 5. Execution Speed

	CEXs can now guarantee the fastest transaction execution speed because of their expensive and advanced systems and servers. They have perfected their infrastructures and practices throughout time to guarantee a faster execution speed. DEX transactions can be slower compared to CEX speed since blockchains are still in the working process of scaling up their speed.