So that you can also buy and selling cryptocurrencies along with other digital assets, the most frequent 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 typical way of transacting in cryptocurrencies along with other digital assets is via a Cryptocurrency Exchange.

There are Centralized and Decentralized Cryptocurrency Exchanges, every offers advantages and disadvantages.

Centralized Cryptocurrency Exchanges (“CEX”)

Centralized cryptocurrency exchanges behave as an intermediary between a buyer plus a seller making money through commissions and transaction fees. Imaginable a CEX to be much like a currency markets but for digital assets.

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

CEXs operate using an order book system, meaning that trade orders are listed and sorted by the intended buy or sell price. The matching engine in the exchange then matches sellers and buyers in line with the best executable price due to the desired lot size. Hence, a digital asset’s price will depend on the availability and demand of that asset versus another, whether fiat currency or cryptocurrency.

CEXs determine which digital asset it will allow buying and selling, which provides a small way of comfort that unscrupulous digital assets might be excluded from your CEX.

Decentralized Cryptocurrency Exchanges (“DEX”)

A decentralized exchange is the one other type of exchange which allows peer-to-peer transactions directly from your digital wallet without under-going a middleman.

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

On the other hand, though smart contracts are rules-based, having less a middle man vacation implies that the consumer stays to their own, so DEXs aim at sophisticated investors.

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