September 19, 2021

CEX.IO company blog | Differences between traditional and crypto-exchanges: part 2

Dmitry Volkov, CTO of the international cryptocurrency exchange CEX.IO, continues to talk about differences between traditional and cryptocurrency exchanges.

Custody of client assets

Traditional exchanges usually only providetrading and other related services, but do not store client funds. They rely on clearing firms, depositories and other third parties to hold client funds and assets.

Crypto exchanges store most of thecrypto funds and support the process of automatic deposit and withdrawal of funds. This is a challenging task, especially due to the decentralized nature of the blockchain, and sometimes outages occur.

We use highly secure offline coldwallets and online hot wallets. Cold wallets contain only a small fraction of a user's funds and require two signatures from independent expert systems to improve security.

CEX.IO protects access to user accounts with two-factor authentication (2FA) - notifications of transactions by email and SMS, automatic activity monitoring and additional verification using KYC in case of suspicious transactions.

Our exchange meets high standardssecurity, such as PCI DSS Level 1 (highest level), annually undergoes an external technical audit, and also conducts tests for system hacking several times a year. All data inside the CEX.IO infrastructure is encrypted.

Complexity of technical solutions for instant transactions

On traditional exchanges, as a rule, spottrading takes place on the T + 2 principle, that is, settlements (transfer of funds and assets between the participants in the transaction) occur 2 days after the transaction. Thus, there is no instant withdrawal of funds immediately after a transaction on a traditional exchange.

Crypto exchanges often carry out settlements literally a moment after the transaction has taken place. This requires more complex technical solutions that are much more difficult to maintain.


Thus, crypto exchanges and traditional exchangeshave a lot in common in terms of technical infrastructures. Crypto exchanges may seem to suffer more failures and are less reliable, however this is due to more advanced services such as non-stop transactions.

Crypto exchanges, despite their name, inmostly have a centralized infrastructure. Of course, for security reasons and due to high traffic, they have backups, replication to various servers and data centers, but they are centralized as they are managed by the company.

Theoretically, for infrastructure maintenancea crypto exchange may have a distributed, open source, anonymous development team. Such projects are very difficult to maintain and much less secure than what crypto exchanges require.

There are few truly decentralized crypto exchanges, so almost all existing crypto exchanges are centralized.

Read the material here (original text in English).