What Is Crypto Exchange ?

A crypto exchange is a privately owned platform where users can trade cryptocurrencies in exchange for other crypto assets, NFTs and fiat currencies. A cryptocurrency exchange is the most popular way of transacting in cryptocurrencies as well as other digital assets.

Crypto exchanges work the same as online brokerage platforms. They provide you with the tools you need to trade cryptocurrencies and tokens such as Bitcoin, Ethereum, and Dogecoin. Important factors one should keep in mind while selecting a cryptocurrency exchange include fees, payment methods, supported assets, and security.

Two Types of Crypto Exchanges:

Crypto exchanges can be both- Centralized and Decentralized, each having its own pros and cons.

Centralized Cryptocurrency Exchanges (CEX):

Centralized cryptocurrency exchanges (CEX) act as a middleman between buyer and seller. They make money via commissions and transaction fees. CEX is similar to a stock exchange except for digital assets.
Coinbase, Crypto.com, Gemini, and Binance are examples of a few popular crypto exchanges. These exchanges enable crypto investors to buy and sell digital assets at the existing or prevailing market price, called spot. Investors can also leave orders on these exchanges that get implemented when the price of the asset reaches the traders’ desired price target, known as “limit”. Centralized cryptocurrency exchanges are vulnerable to hacking risks and usually charge higher transaction fees.

Decentralized Cryptocurrency Exchanges (DEX):

A decentralized exchange (DEX) is an exchange where there is no intermediary as the platform permits direct peer-to-peer transactions. Uniswap, PancakeSwap, dYdX, and Kyber – are some examples of DEXs.
These exchanges depend on smart contracts mostly. These smart contracts have more privacy and less slippage compared to a centralized cryptocurrency exchange.Decentralized exchanges are considered more complex and are mainly preferred by sophisticated investors.

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The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.

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