Essential 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.
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 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 often comes with a built in crypto wallet, which you can use for your cryptocurrencies. You can also withdraw your crypto assets to another wallet.
Each centralized exchange has a unique internal architecture. However, most exchanges have order books that match the 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.
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 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 types of decentralized changes: automated market-making DeXs and order-book-based Decentralized Exchanges.
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. They use a decentralized framework for matching and settling 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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