A cryptocurrency exchange is a platform for trading crypto assets such as $ETH, $BTC, and $DOGE On-chain trading market. It functions similarly to a traditional stock exchange, allowing users to create different order types to buy or sell crypto assets. However, cryptocurrency exchanges differ from traditional exchanges in many aspects, including asset classes, hours of operation, regulatory requirements, and more.

Main Differences between Cryptocurrency Exchanges and Traditional Exchanges

Asset Classes

Cryptocurrency One of the most important differences between exchanges and traditional exchanges is the asset classes they handle. Traditional exchanges trade company stocks or shares, while crypto exchanges trade cryptoassets, such as cryptocurrencies, perpetual contracts, structured products, etc.

Operating hours

Traditional exchanges have fixed opening and closing times, and no trading is allowed when the market is closed. In contrast, cryptocurrency exchanges are open 24 hours a day, 365 days a year, allowing trading at any time.

Regulation

The stock exchange has strict regulatory requirements and is supervised by government agencies, requiring users to trade under their real names. On the other hand, decentralized exchanges among cryptocurrency exchanges are generally unregulated and do not require any certification to start trading.

Types of cryptocurrency exchanges

Generally speaking, cryptocurrency exchanges are classified in two ways: p>

1. Are there any intermediaries: CEX and DEX
2. Types of trading assets: spot and derivatives

Centralized exchange CEX

Centralized exchanges (CEX) are managed by central institutions (also known as middlemen or third parties). It is similar to a traditional bank, serving as an intermediary to help users keep and trade crypto assets. Centralized exchanges generally require identity verification (KYC) before trading and are regulated by local policies in the place of registration. Some well-known centralized exchanges include Binance, Coinbase, and OKX.

For more information, you can refer to "What is CEX"

Decentralized Exchange DEX

Decentralized Exchange (DEX) is a peer-to-peer trading market that allows users to trade crypto assets in a non-custodial manner without the involvement of middlemen. It uses smart contracts to facilitate the exchange of assets. Generally, DEX does not require any identity verification before trading and is not regulated by local policies. It only requires a cryptocurrency wallet to start trading. Some well-known decentralized exchanges include Uniswap, Pancakeswap, and Curve Finance.

For more information, you can refer to "What is DEX"

Spot trading

Spot trading is the trading of crypto assets at the current market price , and delivered immediately. When a transaction is successful, the buyer and seller deliver the assets immediately. Spot transactions are limited to spot transactions between assets. It does not support margin and leverage trading. Currently, the spot exchange with the largest trading volume is Binance.

Derivatives Trading

Derivatives in the cryptocurrency field are tradable financial instruments whose value is derived from the underlying cryptoassets. It allows traders to gain exposure to price changes in an asset without actually owning it. Two common types of cryptocurrency derivatives are futures and options. Crypto derivatives trading typically involves long/short, leverage, margin, perpetual futures, etc. Some well-known derivatives exchanges include Binance, OKX, and GMX.

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