A cryptocurrency exchange, also known as a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Crypto exchanges can be structured in a couple of different ways, with varying coin offerings and platform features. Here are some key features of crypto exchanges:

• Centralized vs. Decentralized: Centralized exchanges are privately-owned platforms that facilitate the trading of cryptocurrencies for other crypto assets, including digital and fiat currencies. They closely align with financial regulations from governmental authorities and many will insure U.S. dollar deposits and require proof of identity to use the platform. Decentralized exchanges, on the other hand, are unregulated online exchanges hosted on distributed nodes that are user-owned, and there is no centralized governing authority. While decentralized exchanges offer transparent transactions and fees as well as direct peer-to-peer exchange of cryptocurrency, they often lack liquidity and it can be difficult to find buyers and sellers when trading volumes are low.

• Security: It is important to consider security when researching crypto exchanges. Using a cryptocurrency exchange to store or exchange your fiat and digital assets can be extremely risky. In some cases, users have discovered that their assets are gone completely or indefinitely locked up in bankruptcy proceedings. Because of the amount of currency in their custody, exchanges are often the targets of hackers. It is also important to understand how your cryptocurrency is stored and whether you can take custody of that cryptocurrency by transferring it to your own digital wallet.

• Fees: Crypto exchanges may charge commissions or take fees for their services. Some exchanges may accept credit card payments, wire transfers, or other forms of payment in exchange for digital currencies or cryptocurrencies. A cryptocurrency exchange can be a market maker that typically takes the bid-ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.

• Cryptocurrencies offered: Different exchanges support different coins and core features. Some of the most popular crypto exchanges include Binance, Coinbase Exchange, Kraken, and KuCoin.

Overall, cryptocurrency exchanges function similarly to online brokerage platforms, giving investors the tools to buy and sell cryptocurrencies like Bitcoin, Ethereum, and Tether.