#exchange #intermediaries #HowItGoingOn
The middlemen that stand between cryptocurrency buyers and sellers are called centralized exchanges, or CEXs. Here's a thorough explanation of how they work:
Enrollment and Validation of Users:
On the exchange, users must register for an account and go through a verification process that frequently entails KYC (Know Your Customer) protocols. This guarantees adherence to legal requirements and aids in preventing fraud.
Refunds and Deposits:
Users can fund their exchange account with cryptocurrencies or fiat money (USD, EUR, etc.). These money are kept in custodial wallets by the exchange.
Users have the option to withdraw funds from the exchange to their bank account or personal wallet.
Order Matching:
The exchange compares a user's purchase or sell order with matching orders from other users. An order book that contains a list of all purchase and sell orders is used for this.
The exchange makes certain that the trade is carried out at the best market price.
Trading Commissions:
Exchanges impose transaction fees on each exchange. These costs may take the form of a fixed fee or a percentage of the trade amount.
For exchanges, fees are their main source of income.
Security Procedures:
Several security precautions are put in place by centralized exchanges to safeguard user money and information. This includes encryption, cold storage for most cash, and two-factor authentication (2FA).
It is encouraged that users withdraw substantial quantities of cryptocurrency to their personal wallets because centralized exchanges are susceptible to hacking attempts even with these security precautions.
