For anyone looking to get started as a crypto trader, cryptocurrency exchange platforms offer one of the best venues for buying and selling 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 also get the option of withdrawing your crypto assets to an external 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.

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