Hi and welcome to a new Cryptomatics episode! Today, I will briefly explain what
centralized exchanges are and how they work. We will also take a quick look at some
of the advantages and disadvantages of this type of exchange, and I will give
a few examples so that everything is clear. What Are Centralized Exchanges? In the crypto context, centralized exchanges are platforms on
which you can buy and sell cryptocurrencies. You can do this either using fiat coins, like
euros or dollars, or using other cryptocurrencies, most of the time, Bitcoin and Ether. You can think of them as intermediaries, which ensure that the transactions
are carried out normally. The existence of this intermediary is also
the reason why the term "centralization" is included in their name. How Does a CEX Work? These platforms give you the
possibility to trade cryptocurrencies. This means that if someone wants
to buy a number of ADA tokens using Bitcoin, someone has to sell the ADA. Many exchanges of this type face some
difficulties, as a lack of liquidity may occur.
That transaction would not be able to take
place if no one on the platform sold ADA. Transaction Types Transactions on centralized exchanges
can take place in several ways. First of all, if you want to buy Ether,
even after you register on that platform, you can easily do it by placing
what's called a market order. By doing so, you pass on
your intention to the CEX. Instead, if you want to buy Ether once it reaches
a certain value, you can place a limit order, in which the platform will initiate the desired
transaction when the price reaches that value. There are also more complicated forms of trading, such as margin trading, but the first
two mentioned are the most used today. Advantages of CEX These platforms open the door to the
crypto market for most investors.
They benefit from liquidity
and a large trading volume. Also, they are often very safe
since they require users to prove their identity using official documents. Disadvantages of CEX New CEX platforms on the market may suffer
cyber attacks that endanger the users’ funds. However, this is not valid
for large platforms such as: Binance, Coinbase, Kraken and Crypto.com. These platforms have security teams that
make sure everything works properly. On the other hand, many centralized exchanges
have been accused of market manipulation and insider trading, using information
that is not publicly available. Conclusion I hope you enjoyed today’s video, and if you have questions, don't hesitate
to tell us in the comment section. So much for now, don't forget to Subscribe, like, and share, and I'll wait for you on the
Cryptomatics channel next time as well.
