In the world of Cryptocurrency, apart from DEX (Decentralized Exchange), there is what is called Centralized Exchange (CEX). What is a Centralized Exchange (CEX)? Check out the explanation here.
Pengertian Centralized Exchange (CEX)
Centralized Exchange (CEX) is a crypto asset trading platform operated by a central entity, which acts as an intermediary to facilitate trading between various crypto assets .
In a CEX, all operational and security aspects are managed by a central entity, which often acts as a secure repository for user funds.
In practice, users create an account on the platform and deposit their crypto assets into a wallet hosted by the exchange.
After that, the trading process is carried out within the platform, and the platform is responsible for the storage, security and execution of trades.
Advantages and Disadvantages of Centralized Exchange (CEX)
Advantage
Ease of Use
CEXs are usually easier to use, especially for users new to the world of crypto.
A user-friendly interface and customer support can make the trading experience easier to understand.
High Liquidity
Central exchanges tend to have high liquidity because they pool liquidity from various sources.
This allows users to quickly buy or sell crypto assets without low liquidity risk.
Advanced Trading Features
Central exchanges often provide a variety of advanced trading features, such as market orders, limit orders, and margin trading.
This feature offers greater flexibility for experienced traders.
Well Managed Security
The security of the platform and user funds is generally considered the responsibility of the CEX.
CEXs often implement high-level security measures, such as data encryption and two-factor authentication.
Deficiencies
Dependence on Middle Parties
As a central entity, CEX makes users dependent on the platform's policies and security.
If the exchange experiences an outage or failure, it may impact users.
Centralized Risk Security
Although many CEXs have strict security measures, security risks remain because all funds are centralized in one location.
If a CEX suffers a hack, users may lose their assets.
Requires Identification and KYC
Central exchanges often require user identity verification through Know Your Customer (KYC) for legal compliance.
This identification can be a hindrance for users who want anonymity in crypto trading.
Centralized Exchange dalam Cryptocurrency
Centralized Exchanges have a significant role in the crypto ecosystem, being the main place where many traders and investors place their trades.
Some well-known examples of CEXs include Binance, Coinbase, and Kraken.
Although the growth of DeFi (Decentralized Finance) has attracted attention, CEX remains a popular choice due to the ease of use, high liquidity, and advanced trading features they offer.
Meanwhile, users should consider the benefits and risks associated with reliance on a central entity when selecting a trading platform that suits their needs.
Read Also:
What is a Crypto Exchange and Why is it Important?
Apa Itu Decentralized Exchange (DEX)?
What Is A Supercycle In Crypto?
What is Abnormal Return in Crypto?
DISCLAIMER : This article is informational in nature and is not an offer or invitation to sell or buy any crypto assets. Trading crypto assets is a high-risk activity. Crypto asset prices are volatile, where prices can change significantly from time to time and Bittime is not responsible for changes in fluctuations in crypto asset exchange rates.
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