What is a cryptocurrency exchange, and how do they work?

What is a cryptocurrency exchange, and how do they work?

Before we learn about how cryptocurrency exchange works, let’s understand what cryptocurrency is in brief.


Cryptocurrency is a digitally designed currency that uses cryptography features to secure the currency inside the chain of blocks. Cryptocurrency is a decentralized network based on blockchain technology. It doesn’t have any physical coin or currency. There is no central authority involved, so it is immune from government interference.

Cryptocurrency Exchange :

There are different types of digital currency exchanges:

Centralized Exchange:

Centralized exchanges are similar to regular trade exchanges which are existing right now. In this type of exchange, the market maker mediates the trade between the buyer and seller of the cryptocurrency.

Decentralized Exchange:

This type of exchange is otherwise called a Peer-to-Peer (P2P) cryptocurrency exchange. In the P2P model, the exchange holds the centralized server but doesn’t oversee your trade between buyer and seller.

Here you have the complete authority over your trade. Digital Signature holds the key to any transaction in decentralized exchange.

Local Bitcoins and Xcoins are the fast emerging P2P exchange, but still, there is a lot of scope for new exchanges in the market. If you wish to start a digital currency exchange, Blockchain App Factory is a white-label exchange software development company that can build one for you. They provide a feature-rich exchange solution and user-friendly UI/UX design with more room for customization as per your need.

Hybrid Exchange:

This exchange is a combination of both centralized and decentralized exchanges. The idea is to club the benefit of both the type of exchange.

How Cryptocurrency Exchange Works?

As mentioned above, each type of exchange as a different mode of operation and functionality.

Cryptocurrency Exchanges allow you to trade between buyer and seller.

Cryptocurrency trading involves high volatile currency trading, which is unlikely in the regular stock exchange market.

Cryptocurrency exchanges pair up the potential buyer and seller the specified rate feasible for both the parties.

Most of the centralized exchanges provide a crypto wallet that has an in-build feature for all its users.

If you want to read more about the cryptocurrency exchange platform, you can use read from their website. Contact them for a White-label software solution.