A cryptocurrency exchange is a virtual asset service provider (VASP) that functions as a platform for the trading of digital assets. Through these platforms, users can also purchase and withdraw their digital currencies.
There are two types of cryptocurrency exchanges, centralized (CEX) and decentralized (DEX), which vary greatly from one another. For example, CEXs allow transactions using fiat currencies and implement strict KYC and AML requirements while DEXs do not. Furthermore, CEXs utilize order books to facilitate trading while most DEXs are powered by Automated Market Makers (AMMs). Most importantly, by using a CEX, a user is effectively handing over control of its funds to the exchange. With a DEX, the user remains in control of their assets, however it may take longer to complete a transaction.
Some of the top CEXs include Binance, Huobi, and Coinbase, while the leading DEXs are Uniswap, Curve, Sushiswap, 1INCH and Binance DEX.
CEXs have come under increasing regulations due to their centralized and custodial nature.