This is part 7 of a series of short cryptocurrency “explain it like I’m five” posts. If you’re just joining us, start here: Crypto ELI5 Part 1: What is a blockchain?
This series of blog posts is meant for the absolute beginner in cryptocurrency. They are also meant to be concise and easy to understand. If you’re interested in learning about crypto, some of the history of crypto, and how to get started with using crypto, follow along! We’ll be adding a new post daily and each post will build on the one previous to it.
What is a Cryptocurrency Exchange?
A cryptocurrency exchange is a platform in which you can trade cryptocurrencies for other assets including digital and fiat currencies.
Centralized exchanges are controlled by a company and act as intermediaries between buyers and sellers and make money through transaction fees. Examples include Coinbase, Kraken, and Gemini.
Because centralized exchanges are controlled by a company, they can hold billions of dollars worth of crypto for their customers, which can make them the target of hacks and theft. Centralized exchanges can also charge high transaction fees for the convenience of using their services.
There are decentralized exchanges like UniSwap, but they can be complex to use and do not offer trading with fiat, making them less convenient.
The vast majority of transactions are processed through centralized exchanges.
Check out the next installment in this series: Crypto ELI5 Part 8: What is a crypto wallet?
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