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.

It can be difficult to choose the right exchange for you, given all of the options available.

How centralized crypto exchanges work

Once you have your money deposited on a CeX, the process of purchasing your cryptocurrencies is easy. 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.

Each centralized exchange has a unique internal architecture. However, most exchanges have order books that match the 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

Decentralized exchanges are also easy to use; however, there is a learning curve involved. 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.

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. The difference is that they deploy a decentralized framework to match and settle transactions. Automated market-making DeXs don’t use order books. 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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