What is a CEX?.

A centralised exchange keeps an internal database of who owns what. When you buy bitcoin from another customer, nothing happens on the blockchain: the exchange simply adjusts two rows in its own ledger. Only when you withdraw to your own wallet does a real on-chain transaction occur.

Internal bookkeeping makes trading fast and cheap. There are no network fees per order, matching takes milliseconds and you can trade fractions of a coin. The flip side is that until you withdraw, your balance is a claim on a company rather than an asset on a blockchain.

Exchanges typically hold customer coins in a mix of cold storage, offline and heavily secured, and hot wallets that handle daily withdrawals. That ratio, and who controls the keys, is one of the most revealing questions you can ask an exchange.

Unlike a DEX, where a formula in a liquidity pool sets the price, a CEX uses a classic order book. Buyers post bids, sellers post asks, and the exchange matches what overlaps. The gap between the highest bid and lowest ask is the spread.

A market order fills immediately at the best available price: certain execution, uncertain price. A limit order sets your price and waits: certain price, uncertain execution. For larger amounts a limit order almost always pays off.

Depth matters more than the headline price. An exchange can show an attractive quote with little volume behind it, so your order eats through the book and your average fill is worse than expected.

Both are trading venues, but they differ in who holds the keys, how prices form and what oversight applies. A CEX is usually the practical starting point with euros; a DEX offers maximum self-determination on-chain.

With MiCA fully in force, an exchange may only serve European customers under a crypto-asset service provider licence. That brings concrete duties: customer assets segregated from own funds, capital requirements, a complaints procedure and clear fee disclosure.

It is a genuine improvement, but it is not deposit insurance. No European fund reimburses your crypto if an exchange fails, unlike the hundred thousand euro protection on bank deposits. Segregation helps in insolvency; a hack or fraud remains your risk.

Always check whether the exchange appears in the European register, which national supervisor oversees it and where the legal entity sits. A provider naming only an offshore entity falls outside that framework.

The sector's history is largely a history of failed exchanges. Mt. Gox, QuadrigaCX and FTX had different causes — a hack, a vanished key holder, outright fraud — but the same outcome: customers lost access to their coins.

Hence the rule of thumb: not your keys, not your coins. While the exchange holds the keys, your balance is a promise. For amounts you actively trade that is an acceptable trade-off; for long-term holdings a personal wallet, ideally hardware, is the better place.

Reduce operational risk too: enable two-factor authentication with an authenticator app rather than SMS, use a unique password, switch on a withdrawal address whitelist and stay alert to phishing posing as support.

Fees are rarely the decisive criterion; providers differ by tenths of a per cent, while the gap between a regulated and unregulated venue can cost you everything.