Important Information About 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 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.
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.
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 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 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. Automated market-making DeXs don't use order books. They use smart contracts to match and settle orders between a user's wallet and a smart contract. AMM DeXs also outsource liquidity from platform users.
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