Cryptocurrency exchanges operate as digital platforms where users buy, sell, and trade assets like Bitcoin and Ethereum, functioning similarly to stock markets but with unique mechanics. Centralized exchanges (CEXs) like Binance and Coinbase act as intermediaries, managing user funds in custodial wallets, offering user-friendly interfaces, and ensuring liquidity through order books. Users deposit fiat or crypto, place market or limit orders, and the exchange’s matching engine pairs buyers and sellers, executing trades instantly or when price conditions are met. Decentralized exchanges (DEXs) like Uniswap use smart contracts for peer-to-peer trading, prioritizing user control and anonymity but requiring technical know-how. Hybrid models combine CEX speed with DEX privacy.

Trading involves market orders for immediate execution or limit orders for specific prices. Fees, often percentage-based or flat, vary by platform, with discounts for high-volume traders or native token use. Security is critical, with CEXs using cold storage to protect funds and DEXs leveraging blockchain transparency. Liquidity ensures smooth trades, while real-time charts and indicators aid strategy. Regulatory compliance, including KYC, is standard for CEXs, aligning with global AML rules. Volatility drives profit potential but demands risk management, making exchange choice pivotal for traders.