Centralized exchanges can be used to conduct trades from fiat-to-cryptocurrency (or vice versa). They can also be used to conduct trades between two different cryptocurrencies. While this may seem to cover all of the potential transaction types, there is still a market for another type of cryptocurrency exchange as well.
That is how a Centralized exchange work. The platform offers an efficient trading environment at the cost of user’s privacy and personal information. The cryptocurrency data gets transferred through a network including passwords and get stored on a centralized server. These pieces of information are sometimes shared with the government due to regulations.
Features of Centralized Exchange
Ease of access
CEX makes it easier for users to create an account or buy their first cryptocurrency. This helped to bring new users into the system and has also made crypto markets more popular.
Most of these centralized exchanges have licenses and runs under government regulations. This gives the trader an assurance if something goes wrong.
Use of escrow
As a middleman in trades, they hold the currency until both parties complete their end of the bargain. Thus, there’s no need to worry about the transaction after the trade gets finalized.
They make their address and location available to the traders. Hence, it helps the consumers to reach them if needed.
Offers and Discounts
CEX also offer discounts while trading in large amounts. Also, the users can exchange fiat currencies to crypto and cryptocurrencies to fiat.
Benefits of Using Centralized Exchange
Centralized exchanges have a considerable amount of security but are nonetheless fallible. Exacerbated by their custody of funds and information, any infiltration can be devastating.
Speed & Liquidity
Centralized crypto exchanges often have excellent liquidity because many users can simultaneously purchase a certain asset when demand is high.
Relative to DExs, centralized exchanges still hold the edge in functionality because they offer many different features.
Centralized exchanges are more easily regulated than DExs. The former operate with official licensing and regulation as dictated by the relevant jurisdiction’s operator.