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Definition: crypto exchange


(CRYPTOcurrency exchange) An online trading platform that is used to buy, sell and exchange cryptocurrencies and stablecoins as well as DeFi tokens, which are crypto coins and other assets managed by smart contracts (see Ethereum). Crypto exchanges convert fiat currency (dollars, Euros, etc.) to crypto (Bitcoin, Ethereum, etc.), and a processing fee may be taken.

Centralized Exchanges Are Convenient
Like a stock brokerage account, centralized exchanges such as Coinbase and Bitfinex make it easy to invest in crypto because they maintain the keys to the assets. However, as of 2022, the crypto world is little more than a decade old, and all digital services are subject to attacks. For a monthly fee, Coinbase instituted an indemnification option, and time will tell if other centralized exchanges follow suit. See Coinbase and Bitfinex.

Decentralized Exchanges Offer More Options
For maximum security and diversity, users can download and manage their own crypto wallet software and trade on a decentralized exchange (DeX) such as Uniswap or SushiSwap. Wallets have access to myriad programmable applications (see smart contract). However, wallet interfaces differ dramatically. Some are easy to use; others are downright obtuse. In addition, the private keys must be kept secure to avoid losing all assets if the wallet is deleted or damaged. See seed phrase and cold wallet.

Exchanges Differ
Like brokerage firms, some crypto exchanges offer trading alternatives, such as limit orders. Other platforms allow sellers to set their own exchange rate. The crypto world is relatively new, and different options become available all the time. See crypto wallet, decentralized exchange and crypto glossary.