Binance, Kraken, OKEx, and Enifex—are some examples of centralized exchanges currently present in the crypto space. These exchanges are the go-to digital marketplaces for traders to buy, sell, and trade cryptocurrencies.
Centralized exchanges (CEX) use a business model that is quite similar to that of traditional institutions. Every order in centralized exchanges is recorded and validated in the order book, to ensure the correctness of each data. This data, moreover, is being exchanged internally through dedicated servers and are transmitted via a centralized security process.
The most important point to note in centralized exchanges is it is governed and operates under regulatory supervision. It has an extensive built-in KYC policy, hence, follows laws to prevent money laundering and scams.
Now, let us go to the reasons why people turn to centralized exchanges.
Advantages of Centralized Exchanges (CEX)
- Easy to Use
- High Liquidity
- Fiat to Crypto Trading
One of the strengths of centralized exchanges is their speedy transactions. CEXs operate efficiently even with high load and stress because they run on centralized servers and infrastructure. For this reason, transactions are executed quickly in the order book and have a reduced processing time even with high volume.
Most of the CEXs are open to disclosing relevant information such as team members and their headquarters to the public. Because there are more users in a centralized exchange, building transparency and trust among users is crucial.
Relatively, CEXs are also open to being compliant with governmental regulations and authorities. All centralized exchanges require their users to go through a KYC procedure to verify their identities.
Easy to Use
CEXs features a user-friendly interface that allows beginners to easily navigate through the exchange and buy, sell, and trade cryptocurrencies or even trade crypto with fiat currencies.
As a result of the speedy transactions and ease of use of CEXs, more users are attracted to using them; hence, bringing high liquidity to the exchange.
Greater trading volumes and liquidity are good for all traders; thus, in the entire centralized platform.
Fiat to Crypto Trading
CEXs that are compliant with governmental regulations can easily connect to the outside financial world. Most CEXs offer fiat to crypto trading, providing users the ability to move money from their bank accounts directly to the centralized exchange to buy cryptocurrencies. Similarly, users can also withdraw their cryptocurrencies to fiat whenever they please.
These benefits of centralized exchanges allow more users to trust and turn to them when it comes to crypto trading. With that said, it is still important for users to do their own research first and understand how centralized exchanges work before using them.
Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Enifex. Nothing in this article should be interpreted as investment guidance. Enifex encourages all clients to do their own research before investing in cryptocurrencies.