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So that you can also buy and selling cryptocurrencies and also other digital assets, the most typical 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 way of transacting in cryptocurrencies as well as other digital assets is by a Cryptocurrency Exchange.

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

Centralized Cryptocurrency Exchanges (“CEX”)

Centralized cryptocurrency exchanges become a middle man from your buyer and a seller making money through commissions and transaction fees. You can think of a CEX being much like a currency markets nevertheless for digital assets.

Just like stock trading websites or apps, these exchanges allow cryptocurrency investors to acquire and sell digital assets in the prevailing price, called spot, in order to leave orders which will get executed when the asset extends to the investor’s desired price target, called limit orders.

CEXs operate having an order book system, which means that exchange orders are listed and sorted by the intended sell or buy price. The matching engine with the exchange then matches sellers and buyers using the best executable price due to the desired lot size. Hence, an electronic digital asset’s price will depend on the availability and need for that asset versus another, may it be fiat currency or cryptocurrency.

CEXs pick which digital asset it is going to allow trading, which provides a little way of comfort that unscrupulous digital assets might be excluded from the CEX.

Decentralized Cryptocurrency Exchanges (“DEX”)

A decentralized exchange is another form of exchange which allows peer-to-peer transactions from your digital wallet without going through a middleman.

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

Alternatively, though smart contracts are rules-based, the lack of an intermediary alternative party signifies that an individual is left to their personal, so DEXs are aimed at sophisticated investors.

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