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 are also available for trading in other cryptocurrencies like 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 often comes with a built in crypto wallet, which you can use for 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.

The platform operators will match orders and provide liquidity to enable efficient trade execution and the highest 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.

People who wish to exchange cryptocurrency without the need to use a third party or trust a central entity for safety and security are well-suited to DeXs.

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. Automated market-making DeXs don’t use order books. They use smart contracts to match and settle orders between a user’s wallet and a smart contract. AMM DeXs also outsource liquidity from platform users.

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