Centralized exchanges allow users to buy and sell cryptocurrencies online and are currently the leading way that people interact with cryptocurrency. The main upside to them is their simplicity, mirroring how stock exchange apps sell shares. Anyone that’s already familiar with investing can create an account on a centralized exchange and have a very intuitive experience.

Any transactions that are made on a centralized exchange are logged within the exchange. All funds that come into and out of the system do so through this third-party, not actually having any documentation on the blockchain. Due to this, users aren’t actually in control of their funds, as the funds are stored on the centralized exchange’s own database, rather than a public blockchain.

Centralized exchanges function like a black box - you never quite know what's going on inside. As a customer, you’re completely in the dark about where your cryptocurrency is, or whether it’s even really there.

As a centralized organization, if you decide to trade on these platforms, you have to also play by their rules. It means that the company has the final say when it comes to managing and moving your cryptocurrency. Even the prices and exchange fees on the platform are all set and regulated by the centralized exchange itself.