A centralised exchange (CEX) is an organisation that coordinates cryptocurrency trading on a big scale, employing a business model similar to that of traditional asset exchanges such as stock exchanges.
In essence, exchanges are markets. They are beneficial when many individuals attempt to purchase and sell the same item concurrently. Famous exchanges in the conventional economy include the New York Stock Exchange and the London Metal Exchange. In the cryptocurrency industry, prominent CEXs include Binance, Coinbase, Gemini, and Kraken.
Some popular CEXs. Image: CoinCulture
By “clearing” deals, centralised crypto exchanges directly engage in markets. Typically, they maintain digital order books, which are listings of open buy and sell orders. They link buyers and sellers and publish current market values based on an asset’s most recent selling price.
CEXs often charge a little higher fees than their decentralised counterparts, but they are typically more secure and user-friendly. For instance, with an instant buy/sell fee of 1%, exchanges such as CoinSpot allow users to purchase cryptocurrencies instantly at the current market price. Though CoinSpot fees are a bit high, users can exchange 360+ cryptocurrencies and enjoy all the fantastic benefits, such as high-security features and 24/7 customer support.
According to a 2021 report by global accounting firm KPMG, exchanges are the most valuable firms in the crypto industry.
CEXs are still significantly more prevalent than decentralised exchanges (DEXs) as of February 2022. KPMG discovered that they accounted for around 95% of crypto exchange trade. Binance, a popular centralised crypto exchange, has also opened its DEX. The centralised Binance exchange conducts more than $20 billion in daily transactions, while the largest DEX, Uniswap, processes less than $2 billion.