Crypto Exchanges

Where Digital Assets Are Bought, Sold, and Trade

What Is a Crypto Exchange and How It Works?

A crypto exchange is a platform where people can buy, sell, and trade cryptocurrencies.

Just like a stock exchange allows investors to trade company shares, a crypto exchange allows users to trade digital assets such as Bitcoin, Ethereum, and other tokens.

It acts as a marketplace that connects buyers and sellers.

Types of Crypto Exchanges

There are two main types:

1️⃣ Centralized Exchanges (CEX)

These are operated by companies.

Examples include large global platforms that manage user accounts and transactions.

How they work:

  • Users create an account
  • Complete identity verification (KYC)
  • Deposit funds
  • Place buy or sell orders

The exchange holds custody of user funds and matches trades internally.

Advantages:

  • Easy to use
  • High liquidity
  • Customer support
  • Faster transactions

Risks:

  • Funds are controlled by the exchange
  • Potential hacking risks
  • Regulatory exposure

2️⃣ Decentralized Exchanges (DEX)

DEX platforms operate through smart contracts without a central company controlling funds.

How they work:

  • Users connect their wallet
  • Trade directly from their wallet
  • No account registration required

Advantages:

  • Full control of funds
  • No central authority
  • Greater privacy

Risks:

  • More technical to use
  • No customer support
  • Smart contract vulnerabilities

How Trading Works on an Exchange

When you buy crypto:

  1. You place an order.
  2. The exchange matches your order with a seller.
  3. The trade is executed.
  4. Your balance updates.

Orders can be:

  • Market Orders – Buy or sell instantly at current price
  • Limit Orders – Buy or sell at a specific price

Understanding order types helps beginners avoid mistakes.

What Is Liquidity?

Liquidity means how easily an asset can be bought or sold without affecting its price.

Higher liquidity means:

  • Faster trades
  • Smaller price changes
  • More stable trading environment

Large exchanges usually have higher liquidity.

Fees on Crypto Exchanges

Most exchanges charge:

  • Trading fees
  • Deposit or withdrawal fees
  • Spread differences

Always check the fee structure before trading.

Final Thoughts

Crypto exchanges are the gateway into the digital asset market.

For beginners, centralized exchanges are usually easier to start with. As experience grows, users may explore decentralized platforms for greater control.

Understanding how exchanges work helps investors trade more confidently and safely.