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As a way to haggle for and selling cryptocurrencies along with other digital assets, the most typical way 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 commonest means of transacting in cryptocurrencies along with other digital assets is via a Cryptocurrency Exchange.

You’ll find Centralized and Decentralized Cryptocurrency Exchanges, every offers benefits and drawbacks.

Centralized Cryptocurrency Exchanges (“CEX”)

Centralized cryptocurrency exchanges work as a middle man from the buyer plus a seller making money through commissions and transaction fees. Imagine a CEX being similar to a stock market but also for digital assets.

Much like trading websites or apps, these exchanges allow cryptocurrency investors to buy and then sell digital assets with the prevailing price, called spot, as well as to leave orders that will get executed if the asset reaches the investor’s desired price target, called limit orders.

CEXs operate utilizing an order book system, which means that trade orders are listed and sorted through the intended purchase or sell price. The matching engine from the exchange then matches consumers depending on the best executable price given the desired lot size. Hence, an electronic digital asset’s price will depend on the availability and need for that asset versus another, may it be fiat currency or cryptocurrency.

CEXs decide which digital asset it is going to allow exchanging, which gives a small way of measuring comfort that unscrupulous digital assets could be excluded from your CEX.

Decentralized Cryptocurrency Exchanges (“DEX”)

A decentralized exchange is an additional type of exchange that enables peer-to-peer transactions straight from your digital wallet without experiencing a middle man.

These decentralized exchanges depend upon smart contracts, self-executing items of code on a blockchain. These smart contracts enable more privacy and fewer slippage (another term for transaction costs) compared to a centralized cryptocurrency exchange.

Conversely, despite the fact that smart contracts are rules-based, deficiency of an intermediary 3rd party means that the consumer stays to their personal, so DEXs are meant for sophisticated investors.

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