CEX is a widely used acronym for a “Centralised Exchange”.
A centralised exchange is a custodial cryptocurrency platform, typically offering a wide range of trading & wallet facilities that store digital assets without giving account owners access to any of the wallet’s actual keys.
These platforms are trust-based IOU ledgers. Your login credentials only verify you as the owner of a website account & don’t give you any actual access to a genuine cryptocurrency wallet.
As legally compliant companies, they will also require users to supply identification, neutering the privacy benefits of some cryptocurrencies.
Balances displayed in these wallets are what the exchange has confirmed they owe the account owner. Without access to the private keys of any of these wallets, you have no way to recover the assets outside of the platform’s internal withdrawal service.
If the exchange website disappeared overnight, went bankrupt, or deleted your account, there is very little you can do. The only security you have is the platform’s public reputation & the trustworthiness that exchanges will allow you to withdraw your owed assets when required.
These services are often the first experience many new users have in cryptocurrency. They have a wide range of services which at first seem very attractive, including;
- Trading fee discounts.
- Affiliate programs.
- Professional advertising.
- Beginner friendly.
- Auto DCA.
- Instant spot trading.
- High APR interest & staking.
- Cheap loans.
- An all-in-one ecosystem.
Like all businesses, the prime focus is on legal compliance & shareholder profits which makes you susceptible to the same greed, corruption, risk & surveillance found in the legacy financial system that we claim to hate.
These companies typically flourish during bull markets, when everyone feels like “the only way is up”. Centralised exchanges offer desirable interest rates to funnel more of this increased liquidity onto their platform.
But what goes up must come down. There is no such thing as an asset that continuously appreciates forever, so when bear markets arrive, cracks begin to show in these companies’ business models.
Whats the point in a mass adopted future for bitcoin if it mirrors all the corruption, failings & surveillance of the legacy banking system?@kycfree
Once profits dry up & the CEX begins to lose money, they are effectively attempting to pay the high-interest rates promised to investors for funds they no longer possess. The next step is bankruptcy, sadly resulting in users losing their funds. The sad part is that these users continue their lives believing that sound cryptocurrency like bitcoin & Monero is nothing more than a scam, whilst the CEOs usually won’t lose a penny.
So what do I do? The most important thing is patience. The onboarding of new users into these spot-buying-based ecosystems has left them impatient & Auto-DCA services have left them lazy.
Research & learn how to use Peer to Peer platforms like Bisq Network & Agoradesk. There are many other decentralised P2P platforms out there; you have to make an effort to find & master them. I can, however, guarantee that you will find it a gratifying, liberating experience once you get past the learning curve.
Finally, ALWAYS HOLD YOUR KEYS. These keys will give you the power to recover your funds, regardless of your service. Also, always be sure to thoroughly research your wallet provider before using it to store more funds than you can afford to lose. My personally recommended wallet would have to be Samourai Wallet.