Businesses that allow customers to trade cryptocurrencies for fiat money or other cryptocurrencies.
What Is an Exchange?
A cryptocurrency exchange is a digital marketplace which enables buyers and sellers to trade cryptocurrencies or other digital assets for fiat money or other cryptocurrencies.
The exchange plays the role of an intermediary between the buyer and the seller.
Exchanges operate like a brokerage and accept payment through card or other forms of electronic payment in exchange for cryptocurrencies.
The cryptocurrency exchange often levies a fee for this process.
Exchanges are able to send the digital assets to a consumer’s personal wallet. Other digital currencies are backed by other commodities, such as precious metals, including gold.
There are two types of cryptocurrency exchanges: decentralized and centralized.
A centralized exchange, which is the most common way to trade cryptocurrencies, involves the exchange acting as the middleman to facilitate the transactions between the parties.
Decentralized exchanges (DEX) enable peer-to-peer cryptocurrency trading and are operated without a central authority. Examples of decentralized exchanges include IDEX and Curve Finance.
Digital currency exchanges have been some of the biggest winners of the surge in cryptocurrencies.
Some of the biggest centralized exchanges include Binance, Coinbase and Kraken.
The more volume there is on an exchange, the lower volatility levels will be.