A centralized exchange is a crypto trading platform run by a company. Binance, Coinbase, and Kraken are the big ones. You create an account, verify your identity, deposit funds, and trade. The exchange holds your crypto in its own wallets. You see a balance in your account, but you do not control the private keys. That makes trading fast and easy. It also makes you dependent on the exchange's security, solvency, and willingness to let you withdraw.

CEXs use an order book. Buy and sell orders are listed by price. A matching engine pairs them. Market makers provide liquidity so large trades do not move the price too much. The whole system runs off-chain, which is why it is fast. Deposits and withdrawals happen on-chain. Everything in between is a database entry. When FTX collapsed in 2022, customers learned the hard way that a database entry is not the same as owning coins. Withdrawals froze. Billions were missing.

CEX trade-offs

• Fast execution and deep liquidity — a real advantage
• Fiat on-ramps and customer support — convenient
• Custodial risk — you trust the exchange with your assets
• KYC requirements — mandatory in most jurisdictions
• Account freezes — possible for compliance or arbitrary reasons

Use a CEX for trading. Move long-term holdings to a wallet you control.