Key Info On Cryptocurrency Exchanges
For anyone looking to get started as a crypto trader, cryptocurrency exchange platforms offer one of the best venues for buying and selling cryptocurrency.
The number of cryptocurrencies available is increasing and most cryptocurrency exchanges are now able to offer a wide range of coins, tokens or altcoins. These digital assets can be traded for other cryptocurrencies such as 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.
Each centralized exchange has a unique internal architecture. However, most exchanges have order books that match the buy and sell orders.
The order book of A CeX lists all orders (buy or sell) made by users who want to trade cryptocurrencies on the exchange. Prices range from the lowest, best bid, highest, and most expensive.
Once an order is matched by a counter-party (i.e., a buyer or seller), the order will be taken by the platform operators, who match the orders and provide liquidity, thus enabling an efficient and fast trade execution at the best price.
How decentralized crypto exchanges work
Decentralized exchanges are also easy to use; however, there is a learning curve involved. These exchanges let you buy cryptocurrencies from other users using only the blockchain as an 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. They use smart contracts to match and settle orders between a user's wallet and a smart contract. AMM DeXs can also source liquidity from platform users.
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