What is cryptocurrency exchange?
A cryptocurrency exchange is a system that works on the basis of trading in cryptocurrencies with other assets. As with a traditional financial exchange, the primary role of the cryptocurrency exchange is to facilitate both the buying and selling of these digital assets.
A cryptocurrency exchange is also known as a digital currency exchange (DCE).
To really understand how currencies are exchanged, consider how these new types of exchanges differ from traditional financial dealings. Cryptocurrencies are inherently unstable in terms of value and origin. Cryptocurrencies like Bitcoin have been linked to major disruptive events where Bitcoin's value changed dramatically in a short period of time or large exchanges went under due to theft, fraud, or other problems.
Cryptocurrency exchanges need to put in place safeguards from some of these events. However, these exchanges serve as keys to the liquid use of cryptocurrency assets.
In other ways, the exchange of cryptocurrencies works the same as the traditional exchange. Many of these platforms allow cryptocurrency buyers and sellers to place limit orders or market orders, and the brokering process works like any other type of asset. The cryptocurrency exchange helps with the transaction and collects the fees. The difference is the underlying asset - Bitcoin or Ethereum or some other cryptocurrency that doesn't have the same valuation characteristics as a national currency.