Centralized Crypto Exchange: Pros, Cons & Development Cost

In today’s time, there is no doubt that crypto exchanges play a crucial role in our daily lives. Since the crypto market is seeking rapid advancement, similarly, the demand for crypto exchanges is also achieving new milestones. 

But as a seasonal trader, it is very clear that you are familiar with the difference between CEX and DEX. However, if you’re just a beginner, then you might need to understand what CEX and DEX are. 

So, to simplify your trading experience and ensure you have a safe and secure trading journey, all you are required to do is scroll through this centralized crypto exchange guide till the end. 

Throughout this comprehensive guide, you will gain detailed insight related to CEX, its pros, cons, and development cost. So, let’s proceed! 

What is a Centralized Crypto Exchange?

A centralized crypto exchange, or CEX, is generally a crypto exchange platform that acts as an intermediary between buyers and sellers of digital assets. Compared to DEX, where transactions are operated directly between users without any involvement of a third party. The CEX ensures users have high liquidity and an instant and stable trading experience with the control of a single organization. 

In simple words, in a CEX platform, your funds will be controlled by the exchange, which ensures secure cryptocurrency storage, order fulfillment, and execution of trading transactions. 

Talking about the working process, on this platform, you’re typically required to register and deposit funds, either in the form of cryptocurrency or fiat. Once you create a crypto exchange, you can easily execute buy and sell orders, respectively. Meanwhile, this exchange acts as a security guarantor and delivers a user trading experience with services like staking or asset management. 

Pros & Cons of CEX

Once you are clear with the concept of what CEX is, it’s time to uncover its pros and cons.  

Benefits of Centralized Crypto Exchange: 

• In CEX platforms, you can access a more comprehensive selection of cryptocurrencies for trading, which includes both well-known and obscure coins. Through this, traders get benefits to diversify their holdings and look for further investment opportunities. 
• In a centralized exchange, users get the advantage of an impressive trading experience. With features like option trading, margin trading, and other financial derivatives, you can gain numerous trading edges. 
• Another major advantage of a centralized exchange is utilization and accessibility. Since the time these platforms came into action, they have often been sharing user-friendly buying, selling, and trading of cryptocurrency globally. Additionally, through these platforms, you also get the benefit of user-friendly interfaces, customer service, and a variety of payment alternatives.
• If we compare it with decentralized exchanges, then centralized exchanges have more liquidity. With this result, traders are able to quickly execute deals at whatever price they’re likely to.
• Another benefit of CEX is FIAT integrations. With the help of this, users are able to seamlessly proceed with the deposit and withdrawal of fiat currencies like USD, EUR, etc. 
• Centralized exchanges often safeguard the user’s funds and data. It enables investors with cutting-edge security and all that is possible with the help of measures like two-factor authentication, cold storage, and routine security audits. 

Disadvantages of Centralized Crypto Exchange: 

• Since centralized exchanges store all the users’ data in a single location, these centrally managed exchanges can lead to cyberattacks and hacking attempts. 
• In a centralized exchange, users are unable to have access to their funds. This is due to the exchange having private keys, and users must have faith in the platform’s security measures and rules specially developed for processing and withdrawing funds. 
• Another major drawback of centralized exchanges is regulation and censorship. Based on the adherence standards, regulatory obligations, and self-regulations, these exchanges might impose certain restrictions on trading, withdrawals, and even on accounts. 
• CEX exchanges are generally helpless to price manipulations, fictitious trading volume, and other corrupt practices. Due to this, it can lead to misleading traders, compromise market credibility, and other issues. 
• In CEX, users normally have to pay fees on their deposits, withdrawals, and other exchange-related services. These fees might lead to lower trading activity and overall profitability. 
• In CEX, you will typically have to face the absence of transparency; as a result, you are unable to manage your funds, execute trades, and get insights related to the trade volume. 

Development Cost of a Centralized Crypto Exchange

After reading about the pros and cons, if you have plans to build a crypto exchange, then the first thing you need to know is that the process of developing an exchange is complicated. You will generally require the help of a developer and a large amount of capital. 

Talking about the cost of developing a crypto exchange, it is usually a multifaceted investment, which ranges between $20,000 and $80,000, based on the needs, user load, and security features. 

However, here are the leading cost drivers. 

Platform Complexity: 

The more complex the platform you choose to build, the more resources you will have to invest. However, the prices might fluctuate due to the implementation of premium features such as derivatives, margin trading, NFT marketplaces, and other sophisticated architecture. 

Choice of Platform:

To save money, some companies choose to build apps only for one platform, like iOS or Android. But this limits how many people can use the app. So, with the help of cross-platform development, you can reach a wider audience and avoid the extra cost for each platform. 

Development Model:

There are several ways to build an exchange. Creating one from scratch takes a lot of time and resources, but gives you a completely tailored solution that matches your organization’s needs.

Security Features:

Investing in features like robust security tools will definitely pay off, as it shields the user’s data and contributes towards corporate development. Advanced standards like encryption, 2FA, and smart contracts, etc., with GDPR, AML, and KYC regulations.

Deployment, Hosting & Maintenance:

If we compare, then reliable software companies typically offer after-launch support, technical maintenance, and server security tools. These services ensure you’re not left struggling with a new and unfamiliar platform on your own. 

Conclusion

To conclude, centralized crypto exchanges remain vital for traders, offering high liquidity, user-friendly features, and robust trading options. 

Yet, developing a secure and scalable CEX demands the right partner and investment. So, this is where Technoloader becomes your ideal partner. With proven experience in blockchain and crypto exchange, we will deliver you the best solutions that will keep you competitive in the market.