Key Takeaways:
- A centralised exchange (CEX) is a platform that allows users to buy and sell cryptocurrencies with fiat or other cryptocurrencies.
- Benefits of CEXs include ease of use, a wide variety of assets, deep liquidity, and available customer support.
- Challenges of centralised exchanges include advanced security demands, required trust in the platform, and potential regulatory limitations depending on user jurisdiction.
What Is a Centralised Exchange (CEX)?
A centralised exchange (CEX) is a platform that allows users to buy and sell cryptocurrencies with traditional fiat currencies or other cryptocurrencies. CEXs act as intermediaries between buyers and sellers, holding users’ funds and facilitating transactions.
Centralised exchanges, like the Crypto.com Exchange, are popular because they offer a wide range of products and features. These exchanges also typically have high liquidity, which means users can buy and sell cryptocurrencies quickly and easily. Additionally, many centralised exchanges allow users to buy cryptocurrencies using fiat currencies, while also allowing fiat offramps; these features are usually not offered by decentralised exchanges (DEXs) in comparison.
Learn how to trade on the Crypto.com Exchange here.
Benefits of CEXs
Ease of Use
Centralised exchanges tend to be easier to use than decentralised exchanges because they offer a user-friendly interface alongside customer support, which decentralised exchanges don’t tend to offer.
Variety of Assets
Centralised exchanges tend to offer a wider variety of assets than decentralised exchanges, which includes more trading pairs. This can be beneficial for traders, as it allows them to diversify their portfolio and potentially find new opportunities. Centralised exchanges are also quicker to list new coins and tokens that are not available yet on decentralised exchanges.
Liquidity
Centralised exchanges generally have higher liquidity than decentralised exchanges. This is especially important for traders who need to make large trades or want to take advantage of arbitrage opportunities. Higher liquidity means that the spread is minimal between trading pairs, which is what users look for when choosing a centralised exchange, as it ensures that trades happen quickly at a fair market price.
Customer Service
Centralised exchanges tend to offer better customer support than decentralised exchanges, which tend to not offer individualised customer support. CEXs help to answer questions or solve problems through chat or email, in addition to informational pages and FAQs.
Overall, choosing between a centralised exchange and a decentralised exchange depends on individual needs and priorities. Some prefer a non-custodial decentralised exchange, while others appreciate the ease of use and liquidity of a centralised exchange.
Challenges of CEXs
Advanced Security Demands
Many centralised exchanges hold users’ funds in a single wallet, making them targets for hackers. If an exchange is hacked, the attackers may be able to steal users’ funds, which could result in significant financial losses. When choosing an exchange, DYOR on how and where the exchange stores funds.
Crypto.com keeps users’ funds in various locations, including cold storage offline accounts. Learn more about Crypto.com’s industry-leading security features here.
Trust
Another challenge for CEXs is the exchange experiencing the equivalent of a bank run. If an exchange is unable to pay its debts or otherwise goes bankrupt, users may lose access to their funds. Check if the exchange discloses a public Proof of Reserves (PoR) that proves they are still holding the funds.
Crypto.com has recently published its PoR, which allows users to verify that all customer crypto deposits are held by Crypto.com on a 1:1 ratio.
Geo-Restrictions
Depending on crypto legislation, exchanges might not be able to operate or offer the full width of their services in all jurisdictions. Check if the exchange is able to offer the desired services for pertinent countries.
Find more information on where derivatives and spot trading on the Crypto.com Exchange are available.
Trading on the Crypto.com Exchange
On the Crypto.com Exchange, cryptocurrencies can be traded for stablecoins and other cryptocurrencies. The Crypto.com Exchange offers users the ability to trade more than 200 different cryptocurrencies at market-leading fees, with discounts for those who lock up Cronos (CRO).
To start trading on the Crypto.com Exchange, sign up for a Crypto.com Exchange account and complete the ‘Know Your Customer’ (KYC) procedures. Once approved, users can deposit crypto either via bank transfer (in some jurisdictions) or from another platform, like the Crypto.com App.
Here is an intro to three basic trades for beginners on the Crypto.com Exchange.
Due Diligence and Do Your Own Research
All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction. Any descriptions of Crypto.com products or features are merely for illustrative purposes and do not constitute an endorsement, invitation, or solicitation.
In addition, the Crypto.com Exchange and the products described herein are distinct from the Crypto.com Main App, and the availability of products and services on the Crypto.com Exchange is subject to jurisdictional limits. Before accessing the Crypto.com Exchange, please refer to the following link and ensure that you are not in any geo-restricted jurisdictions for Spot Trading.
Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.
