Definition
A centralized exchange, or CEX, is a venue run by an identifiable organization that administers trading and customer balances. Its defining feature is reliance on that operator’s systems and custody arrangements. Using blockchain assets does not mean every trade on the platform is itself recorded on a blockchain.
How It Works
After a supported deposit is credited, the exchange records a balance in its internal ledger. A matching engine can execute compatible orders and update the buyer’s and seller’s balances without sending a separate blockchain transaction for each trade. A withdrawal requests an external asset transfer and may require network confirmations and platform checks.
For example, buying ETH with USDT changes the two account balances. The account holder usually does not receive the private key of the exchange wallet holding the corresponding assets. Identity checks, supported markets, fees, and withdrawal conditions depend on the service and jurisdiction.
Key Considerations
A CEX can simplify order management and account recovery, but access to funds depends on the operator’s security, solvency, and processing. Trading balances are not the same as self-custody. Reserve disclosures can provide useful evidence, yet do not by themselves establish all liabilities or eliminate operational risk. Strong account authentication protects access but cannot remove platform-level risk.