Centralized exchanges (CEXs) are one of the most popular choices for cryptocurrency investors, especially for newcomers.
To start trading on a CEX, users first need to complete KYC verification by providing personal information such as their name, address, and government-issued ID.
Once verified, users can begin trading by purchasing cryptocurrencies through P2P platforms or depositing existing cryptocurrencies into their exchange wallet. They can then place buy/sell orders based on their needs.
When users place buy/sell orders on a CEX, the exchange processes the transactions on centralized servers using an order-book matching model.
What are the advantages of CEX – Centralized Exchange?
Trading Fees: This is the primary revenue source for exchanges. Every time a user executes a buy or sell transaction, the exchange charges a certain fee.
Listing Fees: Some exchanges may require cryptocurrency projects to pay a fee to have their tokens or coins listed on the platform.
Deposit/Withdrawal Fees: Some exchanges charge fees when users deposit fiat or cryptocurrencies into their accounts or withdraw funds.
Interest from Margin Trading: Exchanges can also earn interest by offering margin trading services, allowing users to borrow funds for trading.
Lending/Borrowing: Some exchanges offer cryptocurrency lending and borrowing services, earning profits from interest rate differentials.
Staking Service Fees: Exchanges may offer staking services for cryptocurrencies and charge users service fees.
Advertising and Media Partnerships: Due to their large user base, exchanges can generate revenue from advertising and partnerships with other projects.
Premium Services or VIP Accounts: Exchanges may offer VIP account options with special privileges and charge higher fees for these premium services.
Spread: Some exchanges profit from the difference between the buying and selling prices of trading pairs.
Centralized exchanges may have multiple revenue streams beyond the points mentioned above, and their business models can vary depending on their strategies and market positioning.
