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So that you can purchase and selling cryptocurrencies and also other digital assets, the commonest strategy 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 common means of transacting in cryptocurrencies along with other digital assets is by a Cryptocurrency Exchange.

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

Centralized Cryptocurrency Exchanges (“CEX”)

Centralized cryptocurrency exchanges work as a middleman from your buyer along with a seller and earn money through commissions and transaction fees. You can think of a CEX being similar to a stock exchange but for digital assets.

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

CEXs operate utilizing an order book system, which means that trade orders are listed and sorted from the intended purchase or sell price. The matching engine of the exchange then matches sellers and buyers in line with the best executable price because of the desired lot size. Hence, searching for asset’s price depends on the production and need for that asset versus another, whether it be fiat currency or cryptocurrency.

CEXs pick which digital asset it will allow trading in, which gives a smaller way of comfort that unscrupulous digital assets may be excluded from the CEX.

Decentralized Cryptocurrency Exchanges (“DEX”)

A decentralized exchange is the one other kind of exchange that allows peer-to-peer transactions completely from your digital wallet without under-going a middleman.

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

Conversely, although smart contracts are rules-based, the possible lack of a middleman vacation signifies that the person stays to their personal, so DEXs are meant for sophisticated investors.

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