Centralized crypto exchanges, also known as “centralized trading platforms,” are online platforms that allow users to buy and sell cryptocurrencies. They are considered to be the traditional form of crypto exchanges, and have been around since the early days of the crypto market. In contrast, decentralized exchanges (DEXs) have only emerged in recent years and operate on a peer-to-peer (P2P) basis.
Centralized crypto exchanges can be thought of like a traditional stock exchange. Just as a stock exchange is a marketplace for buying and selling stocks, a centralized crypto exchange is a marketplace for buying and selling cryptocurrencies. Just as a stock exchange has a centralized location and a team of professionals to oversee and regulate the trading activity, a centralized crypto exchange also has a central point of control and a team of employees to manage and regulate the trading activity. And just as a stock exchange requires investors to deposit their money into a brokerage account before they can buy and sell stocks, a centralized crypto exchange requires users to deposit their cryptocurrencies into the exchange’s digital wallet before they can buy and sell on the platform.