Crypto Exchange
AdvancedA crypto exchange is a platform where people can buy, sell and trade cryptocurrencies and other digital assets, either for traditional currencies or for other cryptocurrencies.
Centralized exchanges are run by companies that hold customers' funds, match buy and sell orders and often offer other services such as custody, lending and staking. Decentralized exchanges allow users to trade directly from their own wallets using smart contracts, without a central operator holding their funds.
For example, a person might open an account on a centralized exchange, verify their identity, deposit money from their bank account and use it to buy cryptocurrency, which the exchange holds on their behalf unless they withdraw it to their own wallet.
Exchanges have played a central role in the growth of cryptocurrency markets, but they also carry risks. Several major exchanges have collapsed, been hacked or misused customer funds, most notably FTX in 2022, leaving customers with large losses.
Regulation of crypto exchanges has increased in many countries, with requirements covering licensing, anti-money laundering checks, safeguarding customer assets and disclosure. Users should understand whether their funds are held separately and what protections apply.
For worked examples and full lessons, visit notesbysara.org.