Cryptocurrency exchange platforms are a great way to start trading cryptocurrency.

As the number of cryptocurrencies on offer continues to grow, most crypto exchanges have grown accustomed to offering users a variety of coins, tokens, or altcoins. These digital assets can be traded for other cryptocurrencies such as Bitcoin and Ethereum.

However, with so many exchanges available, it can be daunting trying to figure out which ones best suit your needs.

How Centralized Crypto Exchanges Work

It is very easy to purchase your cryptocurrency once your money has been deposited on a CeX. The CeX usually comes with a built-in crypto wallet that you can use to store your cryptocurrencies. You can also withdraw your crypto assets to another wallet.

Every centralized exchange features a different internal architecture; however, most centralized exchanges operate with order books that match buy and sell orders.

A CeX’s order book lists all orders (buy and sell) from users looking to trade cryptocurrencies on that particular exchange with prices ranging from the best offers, best bid, high, low, etc.

Once an order is matched by a counter-party (i.e., a buyer or seller), the order will be taken by the platform operators, who match the orders and provide liquidity, thus enabling an efficient and fast trade execution at the best price.

How Decentralized Crypto Exchanges Work

Although decentralized exchanges can be very easy to use, there are some learning curves. These exchanges let you buy cryptocurrencies from other users using only the blockchain as an intermediary.

DeXs are great for people who want to exchange cryptocurrencies without having to go through a third party and trusting a central entity with the safety of their funds.

There are two categories of decentralized changes: order-book-based decentralized exchanges and automated market-making DeXs.

Decentralized, order-book-based exchanges work in the same manner as centralized exchanges. They list all orders on an online order book and price range from the lowest asking prices to the highest bids. The difference is that they deploy a decentralized framework to match and settle transactions. Order books are not used by automated market-making DeXs. Smart contracts are used to match and settle orders between users’ wallets and smart contracts. AMM DeXs can also source liquidity from platform users.

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