Centralised Exchange (CEX)

A centralised exchange (CEX) is an organisation that facilitates the exchange of cryptocurrency assets. It is owned and run by a central authority figure or company in a centralised manner.

Centralised exchanges typically have an order book, which is how they facilitate trades. For example, a trader puts in an order when they wish to sell a token at a particular price, and another trader sets an order to buy the asset at the same price. The CEX will connect these two traders so that a trade can be completed on both ends. This is how the order book works: cataloguing every buy and sell order and connecting traders to facilitate these requests.

When trading on a CEX, users should understand that no actual exchange of assets occurs, as the CEX takes custody of user deposits and handles everything. The funds do not get converted and returned until the user withdraws them.

CEXs are one of the most popular ways to trade cryptocurrency, with their main point of authority making transactions quicker and easier to make trades. Although they have their benefits, CEXs have disadvantages, as well, as they can be a target for hacks, potentially causing service issues. Another disadvantage is that CEXs typically face the most regulation and censorship from governments.