What Is A Crypto Exchange?

February 15, 2023

The ABC's Of Crypto Exchanges

Have you ever heard of a crypto exchange? If not, then you're in the right place. Cryptocurrency exchanges are often shrouded in mystery and confusion. But don't worry, we've got you covered! Let's learn all about what a crypto exchange is, how it works, and why it is important to know about them.

In simplest terms, a cryptocurrency exchange is an online platform or service that allows users to trade digital currencies for other assets such as fiat money or different digital currencies. In other words, it's like an online stock market where traders can buy and sell cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC) Bitcoin Cash (BCH), Chainlink and many more. Crypto exchanges provide liquidity for these digital assets by allowing users to quickly convert one currency into another.

Choosing A Crypto Exchange

The process of trading on a crypto exchange is relatively easy! But before you can get started, consider some steps on how to select the best exchange for ease of use and maximum safety:

Types Of Exchanges

Cryptocurrency exchanges come in different forms and offer various features depending on their purpose and target audience. For example, some crypto exchanges focus solely on spot trading while others offer derivatives such as futures contracts or options trading. Some exchanges also allow users to margin trade with leverage or participate in over-the-counter (OTC) trading.

Centralized Exchanges

The most common type of crypto exchange is the centralized exchange (CEX). These exchanges are operated by a company that holds user funds in order to facilitate transactions between buyers and sellers. Centralized exchanges have been around since the early days of cryptocurrency trading and may be subject to government regulations depending on the country they operate in.

Decentralized Exchanges

Decentralized exchanges (DEXs) on the other hand do not require a third-party middleman to facilitate trades as they are peer-to-peer platforms powered by blockchain technology which enables direct transactions between buyers and sellers without any intermediary being involved. DEXs typically offer more privacy than CEXs but can be more complicated for novice traders due to their decentralized nature.  

Both types of exchanges have their own advantages and disadvantages so it’s best to research each one before deciding which one is right for you.

Safety First

First you will need to find (DYOR) a reputable trading platform and create an account. It is always advisable to check the country where the business is registered in and the authority that regulates it. It might easier for example to use a crypto exchange in the country where you reside or in a country where you trust that if something goes wrong there can be an effective legal system in place that allows a fair due process.



Reputable platforms place a focus on security and often use specialist third-parties to help them safeguard users funds. So it is always good to check out what processes are in place. The Smart Exchange is USA based and FinCEN-registered, using 2 cybersecurity firms for protection and a highly secure digital asset custodial solution for extra peace of mind.

Sign Up & Identity Check

Most exchanges that have a fiat on-ramp (a way to convert conventional currency such as USD to crypto) require a form of identification check (KYC aka Know Your Customer) during the sign up process. This requires some form of identification such as ID or passport and potentially some additional documents. Some exchanges take up to 4 weeks to approve a new account, the good news for you is that it takes less than 24 hours to sign up on the SmartFi platform.

Trading On A Crypto Exchange

Funding Your Account

Once signed up, you have two options of funding your account. Purchasing crypto in an exchange that has credit card, ACH and other such options is easy. However it is important to consider that not all exchanges allow this. So please check before you proceed. If you already have crypto, all exchanges could be considered as transferring crypto is the fastest way to fund your new wallet.

Placing Orders

To get started review the trading instructions provided before selecting your desired trading pair (for example ETH/USD). This is the currency you want to exchange/trade with another currency. After selecting the trading pair, choose how much of the selected cryptocurrency you would like to purchase. Depending on your trading strategy, you can then place market or limit buy orders or even set stop loss orders to minimize losses should the cryptocurrency's actual price dip below your purchase price.

Market Vs Limit Orders

A Market Order is the most basic type of order, that immediately buys the cryptocurrency for its current market price. With Limit Orders on the other hand, you can set a price you would like to buy a certain crypto with, and the order will be executed only when the price you set becomes the market price. A simple example of this is when a trader buys a cryptocurrency, then sets a limit order to sell it when it reaches a 30% increase on it's current market value.

It is highly recommended that you do further research in trading strategies and techniques before you choose which order is the right for you. Overall Once your orders are placed, all that's left is for them to be executed and processed - after which the purchased cryptocurrencies will show up in your wallet!

Trading Fees

Trading fees in crypto refer to the charges incurred when a crypto user completes trades on an exchange. The fee varies depending on which crypto exchange you are using, but typically crypto exchanges charge a fee of 0.1–0.25% for all crypto-fiat or crypto-crypto trades. These fees are a percentage of the total amount of the crypto being traded, and are usually paid by both parties involved in the trade. To maximize profits, crypto users should consider taking advantage of any promotions, discounts or loyalty programs crypto exchanges offer - these can reduce the fees substantially and make trading easier.

It is important to remember that many crypto exchanges charge fees for depositing and withdrawing crypto, as well as for each trade you make. The fees can be very small or they can be relatively high, depending on the exchange you use and the current market conditions. When fees are high, sometimes making small trades becomes unprofitable. The fees are always subject to change, so this is something to keep an eye on.


Smart Trading

So there you have it – a brief overview of cryptocurrency exchanges! Whether you’re a seasoned trader or just getting started with cryptocurrencies, understanding how crypto exchanges work can help you make informed decisions when trading digital assets.

Just remember that no matter which type of exchange you decide to use, always conduct your own research before placing any trades! Good luck out there!

Kostas Alekoglu
Kostas Alekoglu has been involved with the world of cryptocurrency, blockchain and web3 since 2018. He has been a part of numerous altcoin projects in the sectors of DeFi, security, crypto gaming, and NFTs.

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