A Centralized Exchange (CEX) is service that has full custody of the assets being traded.

Unlike decentralized exchanges, which operate on a peer-to-peer basis and do not require a central authority, a centralized exchange is operated by a single company or organization and acts as a central counterparty for all transactions. This means that users of a centralized exchange must entrust their funds to the exchange in order to participate in trading, which can make them vulnerable to security breaches and other risks.

A CEX is a type of exchange that is not built on a decentralized network and does not use smart contracts to facilitate transactions. Instead, it relies on a central server or other central authority to manage the exchange and process transactions.

CEXs are typically more user-friendly and have higher liquidity than decentralized exchanges, but they also come with the potential drawbacks of being less secure and less transparent.

Some crypto protocols are built on top of CEXs in order to provide users with access to the liquidity and other benefits of the centralized exchange, while still using the decentralized network and smart contracts to provide some of the advantages of DeFi.

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