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As a way to haggle for and selling cryptocurrencies as well as other digital assets, the commonest approach is to transact with Crypto Exchanges. Cryptocurrency exchanges are privately-owned platforms that facilitate the trading of cryptocurrencies for other crypto assets, including digital and fiat currencies and NFTs.

Key Highlights

The most frequent means of transacting in cryptocurrencies and also other digital assets is via a Cryptocurrency Exchange.

There are Centralized and Decentralized Cryptocurrency Exchanges, and every offers advantages and disadvantages.

Centralized Cryptocurrency Exchanges (“CEX”)

Centralized cryptocurrency exchanges behave as a middle man between a buyer plus a seller and earn money through commissions and transaction fees. Imagine a CEX being much like a currency markets but also for digital assets.

Much like trading websites or apps, these exchanges allow cryptocurrency investors to acquire and then sell on digital assets in the prevailing price, called spot, in order to leave orders that will get executed once the asset grows to the investor’s desired price target, called limit orders.

CEXs operate having an order book system, which means that purchase and sell orders are listed and sorted through the intended purchase and sell price. The matching engine with the exchange then matches clients using the best executable price because of the desired lot size. Hence, a digital asset’s price is dependent upon the provision and need for that asset versus another, whether it be fiat currency or cryptocurrency.

CEXs determine which digital asset it’ll allow exchanging, which supplies a smaller measure of comfort that unscrupulous digital assets could be excluded from the CEX.

Decentralized Cryptocurrency Exchanges (“DEX”)

A decentralized exchange is another sort of exchange which allows peer-to-peer transactions completely from your digital wallet without under-going an intermediary.

These decentralized exchanges depend upon smart contracts, self-executing components of code on a blockchain. These smart contracts allow for more privacy much less slippage (another term for transaction costs) than the usual centralized cryptocurrency exchange.

Alternatively, despite the fact that smart contracts are rules-based, the possible lack of a middle man alternative party implies that an individual is left to their own, so DEXs are designed for sophisticated investors.

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