Crypto glossary

Cryptocurrency exchange

Definition

A cryptocurrency exchange is a platform for buying, selling and swapping crypto, either run by a company holding user funds or by smart contracts.

Exchanges are where most people first buy crypto. Centralised exchanges run order books in their own systems, hold customers' fiat and coins, and must usually verify identity. Decentralised exchanges let users trade directly from their wallets through smart contracts. Peer-to-peer marketplaces match buyers and sellers who pay each other in fiat, and brokers or apps sell crypto at a quoted price.

Choosing one involves comparing licences and regulatory status in your country, fees and spreads, the assets and networks supported, liquidity, security record and whether the platform publishes proof of reserves. In the EU, firms need a MiCA licence as crypto-asset service providers; other regions have their own registration regimes.

The biggest risk on centralised platforms is custody: funds left on an exchange depend on its solvency and honesty, as the collapses of Mt. Gox in 2014 and FTX in 2022 showed. Decentralised exchanges remove that risk but add smart contract bugs, scam tokens and phishing front-ends. Withdrawing to a wallet you control is the usual way to reduce exposure.

Example

A first-time buyer in Spain compares two licensed exchanges, picks the one with lower card fees, buys BTC and then withdraws it to a hardware wallet.

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