For anyone looking to get started as a crypto trader, cryptocurrency exchange platforms offer one of the best venues for buying and selling cryptocurrency.

The number of cryptocurrencies available is increasing and most cryptocurrency exchanges are now able to offer a wide range 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

Once you have your money deposited on a CeX, the process of purchasing your cryptocurrencies is easy. The CeX often comes with a built in crypto wallet, which you can use for your cryptocurrencies. You also get the option of withdrawing your crypto assets to an external wallet.

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

The order book of A CeX lists all orders (buy or sell) made by users who want to trade cryptocurrencies on the exchange. Prices range from the lowest, best bid, highest, and most expensive.

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 types of exchanges allow you to buy cryptocurrencies from other users with nothing but the blockchain as the 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 types of decentralized changes: automated market-making DeXs and order-book-based Decentralized Exchanges.

Order-book-based decentralized exchanges operate in the same way as centralized exchanges in that they list all of their orders on an order book with prices ranging from best asking prices to the best bids. They use a decentralized framework for matching and settling 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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