If you’re new to cryptocurrency trading and you’re wondering where you should invest your cash, you might want to consider the different types of exchanges available to you before you pick a cryptocurrency. One of the biggest and most popular is centralized exchanges (CEX), which allow users in many countries to buy and sell cryptocurrencies using fiat cash.
This, coupled with the fact that centralized exchanges, unlike decentralized exchanges, have official support channels and offer custodial wallets as standard, makes many CEX options more accessible for newcomers who are looking to invest in cryptocurrency for the first time. So, what exactly is a centralized exchange? Let’s find out in this AAG Academy guide.
A CEX is essentially a marketplace for cryptocurrencies. They allow you to buy and sell coins and tokens in much the same way you might buy and sell shares in a public company on a stock exchange. Once you have created an account, most centralized exchanges allow you to buy cryptocurrencies with a debit or credit card in supported countries.
A CEX acts as a third-party, matching buyers and sellers, and they are generally considered to be safer and more reliable than decentralized exchanges in certain aspects. That’s one reason why centralized exchanges are by far the biggest in terms of value and trade volume, accounting for 95% of all transactions, according to KPMG.
One of the things that differentiates a CEX from a decentralized exchange (DEX) is that a CEX is governed by a company or central organization — typically the team that founded it. All developments and decisions are the responsibility of the team in control, and they essentially have the power to do whatever they see fit.
Binance, currently the biggest cryptocurrency exchange in the world in terms of value, with a market capitalization of almost $46 billion as of August 2022, is a centralized exchange. Coinbase is the second-biggest, with a value of over $16.5 billion. In comparison, Uniswap, the largest decentralized exchange, has a current market cap of less than $5.5 billion.
These are some of the biggest advantages centralized exchanges offer over other exchange types:
These are some of the biggest disadvantages of centralized exchanges:
The 10 most popular centralized exchanges, according to CoinMarketCap, are currently:
Yes, centralized exchanges (CEX) are more popular than decentralized exchanges (DEX), mostly because they are more accessible to cryptocurrency newcomers, they offer greater support, and they allow users to invest using conventional fiat cash in many countries. However, decentralized exchanges are growing in popularity.
Like most internet-based companies and platforms, centralized exchanges are at risk of being hacked, and their centralized nature makes them a more attractive target for attackers. However, today’s biggest CEX companies use incredibly strong security to protect their users. Users can also help increase their own security by using strong passwords, never sharing their account information with anyone else, and never using untrusted services.
Centralized exchanges offer access to some of the world’s biggest cryptocurrencies, including Binance and Ethereum. However, cryptocurrency availability varies between exchanges, so it’s important to check whether the cryptocurrency you want to purchase is available before signing up to a new exchange.
This article is intended to provide generalized information designed to educate a broad segment of the public; it does not give personalized investment, legal, or other business and professional advice. Before taking any action, you should always consult with your own financial, legal, tax, investment, or other professional for advice on matters that affect you and/or your business.
Be the first to get our newsletter full of company, product updates as well as market news.