How a crypto exchange works
A crypto exchange is the platform where you buy, sell and trade crypto. It\'s the gateway to the crypto world, but understanding how it works and its risks is key to avoid nasty surprises.
What it is and does
An exchange connects crypto buyers and sellers, matching their orders (like a stock market). It lets you swap euros for crypto, trade between cryptocurrencies, and store your funds on the platform. The best-known ones handle billions in daily volume.
Centralised vs decentralised
There are two types. The centralised ones (CEX, like Binance or Coinbase): a company runs the platform, it\'s easy to use and holds your funds for you (custody). The decentralised ones (DEX): you trade directly from your wallet with no intermediary, you control your funds, but it\'s more technical. To start, centralised ones are more accessible.
The custody risk
Here\'s the critical point: in a centralised exchange, your crypto is held by the platform, not you. If the exchange goes bankrupt, is hacked or freezes withdrawals, your funds are at its mercy. The FTX case (which collapsed and ruined many) is the example. Remember: "not your keys, not your coins".
How to choose a good exchange
Prioritise: large, established exchanges (more reliable), with good regulation and reputation, high liquidity (to trade without slippage), and proven security (mandatory 2FA, no serious hack history). Distrust small, new exchanges or those promising unreal returns. Convenience doesn\'t offset the risk of losing everything.
Where to start
For small amounts you trade, a serious, regulated exchange is acceptable for convenience. But as soon as you accumulate a significant amount, learn to withdraw to self-custody (your own wallet). Always use 2FA, verify websites (beware phishing) and never keep on the exchange more than you\'re willing to risk.