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Centralized Exchange

Centralized Exchange

Beginner

A centralized exchange (CEX) is a traditional model of a cryptocurrency marketplace that operates much like a conventional brokerage or stock market. It serves as a third-party platform where traders can buy, sell, and trade digital currencies.

The architecture of CEXs relies on intermediaries who manage all aspects of the transaction process. This central body holds both the user's crypto assets and their private keys, enabling them to maintain a record of all transactions, manage user accounts, and control the platform's overall operation.

Key features and benefits of CEXs include ease of use, high liquidity, and the capacity to handle a large volume of transactions, due to their central management. CEXs can facilitate fiat-to-crypto transactions and often offer advanced trading tools like futures and margin trading. In addition, CEXs often provide customer service for users who need assistance.

However, the centralized nature of these platforms can also manifest disadvantages. Prominent among these are vulnerabilities to cyberattacks and system failures due to the centralized storage of assets and keys. Also, they generally require extensive identity verification procedures, to be in compliance with local regulations. 

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