What Is CEX (Centralized Exchange)?

A CEX (Centralized Exchange) is a crypto trading platform operated and controlled by a single company or entity. Unlike decentralized exchanges (DEXs), CEXs require you to deposit your funds into their custody—they hold your private keys and manage your account balances on their servers.

Why CEXs Matter for Airdrop Farming

CEXs are critical infrastructure for airdrop farmers. When protocols like Arbitrum or Jito distribute tokens, many farmers immediately send their airdropped tokens to CEXs to sell them or swap them for stablecoins. CEXs also serve as on-ramps: farmers use fiat deposits on Coinbase or Kraken to buy ETH or other assets needed to participate in farming activities on Layer 2s and testnets. Some airdrop snapshots specifically exclude CEX-held addresses from eligibility (a Sybil resistance mechanism), so understanding which addresses are flagged as exchange wallets is strategically important.

Practical Considerations

While CEXs offer speed and liquidity for exiting positions, they charge trading fees (typically 0.1%–0.5%) and may have withdrawal delays during volatile markets. For airdrop farmers, this means calculating whether the cost of exiting through a CEX is worth it, especially for smaller claims. Some protocols have explicitly rewarded users who kept tokens in self-custody or in DeFi protocols rather than CEXs—this was part of the philosophy behind early Uniswap and Arbitrum airdrops, which aimed to benefit active participants over passive traders.

CEX Risk vs. DEX

CEXs are regulated financial institutions in many jurisdictions, providing consumer protections but also requiring KYC (Know Your Customer) verification. For airdrop farmers, this creates a privacy trade-off: using a CEX ties your on-chain activity to your identity, whereas using a DEX or AMM like Uniswap keeps transactions pseudonymous. Choosing between CEX and DEX liquidity depends on your exit strategy and risk tolerance.