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As a way to start buying and selling cryptocurrencies and also other digital assets, the commonest 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 commonest method of transacting in cryptocurrencies and also other digital assets is by a Cryptocurrency Exchange.

You can find Centralized and Decentralized Cryptocurrency Exchanges, each offers pros and cons.

Centralized Cryptocurrency Exchanges (“CEX”)

Centralized cryptocurrency exchanges become an intermediary between a buyer along with a seller to make money through commissions and transaction fees. You can think of a CEX to become much like a stock market but also for digital assets.

Comparable to trading and investing websites or apps, these exchanges allow cryptocurrency investors to acquire then sell digital assets in the prevailing price, called spot, as well as to leave orders that will get executed when the asset extends to the investor’s desired price target, called limit orders.

CEXs operate using an order book system, meaning that buy and sell orders are listed and sorted through the intended purchase or sell price. The matching engine in the exchange then matches sellers and buyers using the best executable price because of the desired lot size. Hence, an electronic digital asset’s price is dependent upon the availability and demand of that asset versus another, whether it be fiat currency or cryptocurrency.

CEXs determine which digital asset it’ll allow trading, which provides a small way of comfort that unscrupulous digital assets might be excluded through the CEX.

Decentralized Cryptocurrency Exchanges (“DEX”)

A decentralized exchange is an additional type of exchange that allows peer-to-peer transactions directly from your digital wallet without experiencing an intermediary.

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

Alternatively, despite the fact that smart contracts are rules-based, deficiency of a middleman alternative party implies that the consumer remains to their own, so DEXs are designed for sophisticated investors.

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