Exchange
A platform where users can buy, sell, and trade cryptocurrencies. Centralized exchanges (CEX) are operated by companies that custody user funds and match orders, while decentralized exchanges (DEX) operate via smart contracts, allowing users to trade directly from their wallets.
“Coinbase is a centralized exchange offering a simple buying experience, while Uniswap is a decentralized exchange for swapping tokens without an intermediary.”
DEX (Decentralized Exchange)
A cryptocurrency exchange that operates without a central authority, using smart contracts to enable peer-to-peer trading directly from users' wallets. DEXs never take custody of user funds. Most DEXs use automated market maker (AMM) models with liquidity pools, though some use on-chain order books.
CEX (Centralized Exchange)
A cryptocurrency exchange operated by a centralized company that acts as an intermediary between buyers and sellers. CEXs hold custody of user funds, maintain off-chain order books, and typically require identity verification (KYC). They offer high liquidity and ease of use but introduce counterparty risk.
Trading Pair
A combination of two assets that can be traded against each other on an exchange, denoted as BASE/QUOTE (e.g., BTC/USDT). The base currency is the asset being bought or sold, and the quote currency is the unit of measurement for the price. Trading pairs define what assets you can directly exchange without intermediary conversions.