What Is an Exchange?

A cryptocurrency exchange is a digital marketplace that enables buyers and sellers to trade cryptocurrencies or other digital assets for fiat money or other cryptocurrencies. The exchange is an intermediary between the buyer and the seller. 

Exchanges operate like a brokerage and accept payment through cards or other forms of electronic payment in exchange for cryptocurrencies. It often levies a fee for this process. 

Exchanges are able to send digital assets to a consumer’s personal wallet. Other commodities, such as precious metals, including gold back other digital currencies. 

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 the volatility levels will be.