CEX (Centralized Exchange)

A High-Level View

A CEX consists of eight core modules. These include the front end, custody, matching, and settlement layers. They also include compliance, liquidity, APIs, and monitoring.

• User interface: Traders submit orders and manage accounts
• Custody module: Systems manage hot and cold wallets and balance states
• Matching engine: The engine matches orders with strict fairness rules
• Settlement and ledger: The ledger updates balances and freezes funds as needed
• Risk and compliance: Identity checks, sanctions screening, and transaction monitoring run here
• Market making and liquidity: Internal or external makers stabilize depth
• API layer: REST and WebSocket endpoints power automation
• Monitoring and audit: Logs, metrics, and alerts track behavior and incidents

Lifecycle of a Trade

A user deposits fiat or crypto. The platform credits an internal balance after confirmations. The user submits market or limit orders. The engine matches the order at the best available price. The system settles balances in the ledger. The user later requests a withdrawal. The platform releases funds from hot or cold wallets after checks.

Risk Controls in Production

CEXs apply circuit breakers and rate limits. They run position limits and liquidation logic for leverage. They enforce withdrawal whitelists and cooling periods. They use multi-sig and hot/cold separation for safety. They maintain bug bounties and audit schedules. They publish status updates and incident reports.

Performance and Scalability

Matching engines must maintain low latency. Teams shard ledgers and cache hot data. They batch chain writes when possible. They isolate components with message buses. They scale read paths with in-memory stores. They harden failover and disaster recovery plans.

Integration Surfaces

CEXs integrate with banks, payment gateways, and card processors. They link with KYC vendors and sanctions lists. They run blockchain nodes or use reliable node providers. They integrate liquidity desks and market maker APIs. They pipe logs into SIEM and threat tooling.