What is a crypto exchange?

Think of a digital marketplace: someone wants to give euros for Bitcoin and someone else wants to do the opposite. The exchange provides the mechanism for these two sides to meet. Not all platforms work the same way, though.

On a centralized exchange (CEX), a company runs the service. You usually open an account, complete identity verification (KYC) and deposit money or crypto. Buy and sell orders can be matched through an order book. If you buy Bitcoin with euros, the new balance shows up in your account, but that doesn’t mean it was transferred to a wallet of your own.

On a decentralized exchange (DEX), you usually connect your own wallet and the swap is executed through smart contracts. Many DEXs use liquidity pools, meaning reserves of crypto that users provide so swaps can take place.

Why it matters

For many people, an exchange is their first contact with crypto. But it affects more than which coins are available: it determines the service’s fees, the deposit and withdrawal methods, and who controls the assets while they sit there.

Liquidity, meaning how easily a trade can go through without moving the price much, matters too. The price you see on screen isn’t always the final execution price. We always separate ease of use from total cost and security.

What to watch out for

When you leave crypto on a centralized exchange, the company usually controls the private keys. A security breach, insolvency or a withdrawal freeze can limit your access. A balance in the app isn’t the same as crypto in a wallet whose keys you control.

DEXs carry other risks, such as smart contract bugs and fake tokens. Before any transfer, check the address, the supported network and the withdrawal fees. For accounts on centralized platforms, two-factor authentication (2FA) adds protection, though it doesn’t eliminate the risks of the service itself.