An exchange is a platform that lets people swap one asset for another. That could mean trading AVAX for USDC, swapping tokens between blockchains, or converting crypto to traditional currencies. If you’ve ever exchanged dollars for euros, you already get the idea: an exchange is simply where that trade happens.
In crypto, there are two main types of exchanges: centralized and decentralized.
A centralized exchange (or CEX) is run by a company that acts as the middleman. You create an account, deposit your assets into their platform, and trade through their system. The company holds your crypto, processes trades, and is responsible for security and user accounts. Centralized exchanges are popular because they’re user-friendly and fast, but here’s the catch: you don’t fully control your assets while they’re on the exchange. If the platform gets hacked, freezes withdrawals, or shuts down unexpectedly, your funds could be at risk. That’s why it’s a best practice to only keep what you plan to trade on a centralized exchange, and move the rest to a wallet you control.
Then, there are decentralized exchanges (or DEXs). These work differently, and we’ll break those down in a separate entry. For now, the key takeaway is this: centralized exchanges are more like traditional financial institutions, while decentralized exchanges aim to remove the middleman entirely.
The way people trade assets online is changing, and it's changing fast. Centralized exchanges have become major financial hubs, handling billions in daily volume, but they also raise questions about security, consumer protection, and regulatory oversight. Meanwhile, decentralized alternatives are creating brand-new models for how markets operate.