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As a way to haggle for and selling cryptocurrencies along with other digital assets, the most common approach is to transact with Crypto Exchanges. Cryptocurrency exchanges are privately-owned platforms that facilitate the trading of cryptocurrencies for other crypto assets, including digital and fiat currencies and NFTs.

Key Highlights

The most common method of transacting in cryptocurrencies as well as other digital assets is by a Cryptocurrency Exchange.

You’ll find Centralized and Decentralized Cryptocurrency Exchanges, every offers pros and cons.

Centralized Cryptocurrency Exchanges (“CEX”)

Centralized cryptocurrency exchanges act as a middleman from your buyer plus a seller making money through commissions and transaction fees. Imaginable a CEX being similar to a stock trading game however for digital assets.

Similar to stock trading websites or apps, these exchanges allow cryptocurrency investors to buy then sell digital assets on the prevailing price, called spot, or leave orders that get executed if the asset gets to the investor’s desired price target, called limit orders.

CEXs operate utilizing an order book system, which means that exchange orders are listed and sorted by the intended purchase or sell price. The matching engine with the exchange then matches clients using the best executable price in the desired lot size. Hence, a digital asset’s price will depend on the provision and need for that asset versus another, may it be fiat currency or cryptocurrency.

CEXs determine which digital asset it is going to allow trading, which offers a small way of measuring comfort that unscrupulous digital assets might be excluded in the CEX.

Decentralized Cryptocurrency Exchanges (“DEX”)

A decentralized exchange is another kind of exchange which allows peer-to-peer transactions straight from your digital wallet without experiencing a middle man.

These decentralized exchanges depend upon smart contracts, self-executing bits of code with a blockchain. These smart contracts permit more privacy and much less slippage (another term for transaction costs) than the usual centralized cryptocurrency exchange.

On the other hand, though smart contracts are rules-based, the possible lack of an intermediary 3rd party means that the consumer remains to their personal, so DEXs aim at sophisticated investors.

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