A cryptocurrency exchange is a platform where users can buy, sell, and trade cryptocurrencies. Exchanges act as intermediaries, matching buyers with sellers and providing liquidity for trading pairs like BTC/USD or ETH/BTC. There are two main types: centralized exchanges (CEX) like Coinbase and Binance, and decentralized exchanges (DEX) like Uniswap and PancakeSwap.

Centralized exchanges offer user-friendly interfaces, high liquidity, and fiat on-ramps but require users to trust the platform with their funds. Decentralized exchanges allow direct wallet-to-wallet trading via smart contracts, giving users full control of their assets.

Key Characteristics of Exchange

  • CEX: Centralized (Coinbase, Binance, Kraken) - easier but custodial
  • DEX: Decentralized (Uniswap, SushiSwap) - non-custodial but more complex
  • Trading Pairs: Crypto/crypto (BTC/ETH) or crypto/fiat (BTC/USD)
  • Liquidity: High-volume exchanges offer better prices and faster trades
  • Fees: Vary by exchange (0.1-0.5% for makers/takers)

Real-World Example

On Coinbase (CEX), you can deposit USD, buy Bitcoin, and withdraw it to your wallet—all with a user-friendly interface. On Uniswap (DEX), you connect your MetaMask wallet and swap ETH for any ERC-20 token directly, without creating an account.

Understanding Exchange is easier when you're familiar with these related concepts:

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