What is a crypto exchange, and how do you choose one?
A crypto exchange is the place where you buy, sell, and trade cryptocurrencies. This guide covers what an exchange actually does with your money, the difference between centralised and decentralised exchanges, the fees you will really pay, and the five things to check before you open an account. No experience required.
01 The basics
What is a crypto exchange?
A crypto exchange is a platform that matches people who want to buy crypto with people who want to sell it. You deposit money, place an order, and the exchange finds the other side of that trade. In that sense it works like a marketplace, with the exchange sitting in the middle to make sure both sides get what they agreed to.
Most people start on a centralised exchange, run by a company. You create an account, verify your identity, add funds, and trade through the company's app or website. The company holds your crypto for you and keeps a record of what you own.
The price you see is set by supply and demand. When more people want to buy than sell, the price rises. When more want to sell, it falls. The exchange does not set the price itself, it simply shows you where buyers and sellers currently meet.
Order book
A live list of all the buy and sell orders for an asset, which the exchange uses to match trades.
Trading pair
Two assets you trade against each other, like BTC and USDC, showing how much of one it takes to buy the other.
Liquidity
How easily you can buy or sell without moving the price, higher liquidity means smoother trades.
02 How it works
Centralised vs decentralised exchanges
There are two main types of crypto exchange, and the difference comes down to who holds your money.
A centralised exchange, sometimes called a CEX, is run by a company. It holds your funds, matches your trades, and requires identity verification when you sign up. It feels familiar because it works like most other apps: a login, a balance, and a buy button. This is where almost every beginner starts.
A decentralised exchange, or DEX, has no company in the middle. It runs on smart contracts, which are pieces of code on a blockchain that execute trades automatically. You connect your own wallet and trade directly from it, so you keep control of your funds the whole time. There is no sign-up and no identity check.
The trade-off is complexity. On a DEX you pay network fees, often called gas, and on some blockchains those fees can be higher than the trade itself when the network is busy. You also need to already own crypto in a wallet to use one, which is why beginners rarely start there.
Here is what actually happens when you place a buy order on a centralised exchange.
Add funds
You deposit money or transfer crypto into your exchange account.
Place an order
You choose an asset and enter how much you want to buy.
Match
The exchange pairs your order with a seller at the current market price.
Settle
The crypto lands in your account balance, held by the exchange.
Withdraw
You can move it to your own wallet whenever you want.
03 What to know
Custody, fees, and safety
The single most important idea on any exchange is custody, which means who controls your crypto.
On a custodial exchange, the company holds the private keys that control your funds. You see a balance in the app, but the exchange is the one technically holding the coins. That is convenient, and it means the company can help if you lose your password. It also means you are trusting that company to stay solvent and secure. The phrase "not your keys, not your coins" points at exactly this: if you do not hold the keys, you are relying on someone else.
A non-custodial setup, which is how DEXs and personal wallets work, puts the keys in your hands. You have full control, and nobody can freeze or lose your funds for you. The flip side is that there is no reset button. If you lose your keys, the funds are gone.
Fees are the other thing beginners underestimate. Most exchanges charge a trading fee on each buy and sell, often around 0.1% to 0.6% on the standard trading interface. Simple one-tap buy buttons usually cost more, because they add a spread, which is a gap between the buy and sell price that acts as a hidden fee. Withdrawing crypto to your own wallet can carry a separate network fee too.
For long-term holdings, many people move their crypto off the exchange into a personal wallet once they have bought it. Keeping large amounts on an exchange for years exposes you to the risk that the company is hacked or fails.
04 Get started
How to choose an exchange
Choosing an exchange comes down to five checks. Run through them before you deposit any money.
First, regulation. Check whether the exchange is licensed or registered to operate in your country. A regulated platform has rules to follow and someone to answer to.
Second, security history. Look for cold storage (keeping most funds offline), two-factor authentication, and a clean track record with no major unresolved breaches.
Third, fees. Read the fee page, not the marketing page. Look at trading fees, spreads, and withdrawal fees together.
Fourth, supported assets and regions. Make sure the exchange lists the assets you want and actually serves your country, since availability varies a lot.
Fifth, ease of use. If the app confuses you, you are more likely to make a costly mistake. A clean, simple interface matters more than an advanced one you will never use.
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FAQ
Is my money safe on a crypto exchange?
Your crypto is only as safe as the exchange holding it. Reputable, regulated exchanges use cold storage and security controls, but no exchange is risk-free. For long-term holdings, many people move funds to a personal wallet rather than leaving them on an exchange.
What is the difference between a CEX and a DEX?
A centralised exchange (CEX) is run by a company that holds your funds and requires identity verification. A decentralised exchange (DEX) runs on smart contracts, has no company in the middle, and lets you trade directly from your own wallet. Beginners almost always start with a CEX because it is simpler.
How much are crypto exchange fees?
Standard trading fees usually fall around 0.1% to 0.6% per trade. Simple one-tap buy buttons tend to cost more because they add a spread on top, and withdrawing to your own wallet can carry a network fee. Always compare the full cost, not just the advertised commission.
Do I need to verify my identity to use a crypto exchange?
On most centralised exchanges, yes. Identity verification, often called KYC, is a legal requirement in many countries. Decentralised exchanges do not require it, but they are harder for beginners to use and need an existing crypto wallet.
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