What is an Exchange#
Just as you need to exchange foreign currency when traveling abroad, you can imagine the Web3 world as another country. Whether you want to buy NFTs, invest, or play blockchain games, the first step is to have cryptocurrency in hand. Therefore, cryptocurrency exchanges, where you can buy cryptocurrency, serve as the gateway to the Web3 world.
The collapse of FTX, once the world's second-largest cryptocurrency exchange, made everyone realize the importance of exchange security. Are the virtual assets stored in the exchange safe? What are the types of exchanges? These are topics that many newcomers to the cryptocurrency world are concerned about.
Exchange Classification#
Cryptocurrency exchanges are divided into two main categories: "Centralized Exchanges (CEX)" and "Decentralized Exchanges (DEX)."
Centralized Exchanges (CEX)
Operated by a specific institution or organization, where users' personal assets are held by the exchange, and opening an account requires identity verification (KYC). Exchanges like Okex and Binance are centralized exchanges. Centralized exchanges are mostly regulated, providing an extra layer of security, and are easy to use and convenient, suitable for beginners.
Decentralized Exchanges (DEX)
Operated without a specific organization or institution, where all trading services and game rules are written in smart contracts, executed by code. Uniswap, Qkswap, and dYdX are well-known decentralized exchanges.