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So that you can purchase and selling cryptocurrencies along with other digital assets, the most frequent way 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 typical strategy for transacting in cryptocurrencies and other digital assets is by a Cryptocurrency Exchange.

You will find Centralized and Decentralized Cryptocurrency Exchanges, and each offers advantages and disadvantages.

Centralized Cryptocurrency Exchanges (“CEX”)

Centralized cryptocurrency exchanges behave as an intermediary between a buyer plus a seller to make money through commissions and transaction fees. Imagine a CEX to be similar to a stock market but also for digital assets.

Comparable to trading websites or apps, these exchanges allow cryptocurrency investors to get and sell digital assets in the prevailing price, called spot, or leave orders which get executed if the asset extends to the investor’s desired price target, called limit orders.

CEXs operate utilizing an order book system, meaning buy and sell orders are listed and sorted by the intended purchase or sell price. The matching engine from the exchange then matches clients using the best executable price in the desired lot size. Hence, searching for asset’s price is dependent upon the availability and demand of that asset versus another, whether it be fiat currency or cryptocurrency.

CEXs choose which digital asset it’ll allow trading, which provides a smaller measure of comfort that unscrupulous digital assets could be excluded through the CEX.

Decentralized Cryptocurrency Exchanges (“DEX”)

A decentralized exchange is an additional kind of exchange which allows peer-to-peer transactions from your digital wallet without experiencing a middle man.

These decentralized exchanges depend on smart contracts, self-executing items of code with a blockchain. These smart contracts enable more privacy and less slippage (another term for transaction costs) compared to a centralized cryptocurrency exchange.

Alternatively, though smart contracts are rules-based, the possible lack of an intermediary 3rd party implies that the user is left to their personal, so DEXs are meant for sophisticated investors.

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