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Cryptocurrency exchange platforms are a great way to start trading 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 are also available for trading in other cryptocurrencies like 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.

Every centralized exchange features a different internal architecture; however, most centralized exchanges operate with order books that match 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

Decentralized exchanges are also easy to use; however, there is a learning curve involved. 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 categories of decentralized changes: order-book-based decentralized exchanges and automated market-making DeXs.

Decentralized, order-book-based exchanges work in the same manner as centralized exchanges. They list all orders on an online order book and price range from the lowest asking prices to the highest bids. The difference is that they deploy a decentralized framework to match and settle transactions. Order books are not used by automated market-making DeXs. 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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