What Is a Crypto Exchange? CEX, DEX, Spot and Derivatives

A crypto exchange is a platform where people buy, sell and trade cryptocurrencies, either against other coins or against fiat money such as dollars or euros. Exchanges come in two main types: centralized exchanges (CEXs), run by companies that hold customer funds, and decentralized exchanges (DEXs), run by smart contracts. Most also offer two kinds of markets: spot, for the coins themselves, and derivatives, for contracts that track their price.

Key takeaways

• CEXs are company-run and hold your funds; DEXs run on-chain and you keep custody in your own wallet.
• Spot markets trade the actual coin; derivatives such as perpetual futures trade contracts on its price.
• Most exchanges charge maker and taker fees, plus withdrawal and network fees when you move funds.
• Every exchange has its own order book or pool, so prices differ slightly between venues.
• Key risks are custody, liquidity and smart contract risk, depending on the exchange type.

How a crypto exchange works

On a typical centralized exchange, you create an account, often complete identity verification (KYC), and deposit funds. Your balance is then recorded in the exchange's internal ledger. When you place an order, a matching engine pairs it with orders from other users in the order book, a list of bids (buy orders) and asks (sell orders) at different prices.

On a decentralized exchange, you connect a self-custody crypto wallet and trade directly with smart contracts. Some DEXs use automated market maker (AMM) pools, where prices come from a formula such as x × y = k. Others, including several perp DEXs, run on-chain order books.

CEX vs DEX at a glance

	Centralized exchange (CEX)	Decentralized exchange (DEX)
Who holds funds	The exchange	You, in your wallet
Account	Email login, usually KYC	Wallet connection
Price formation	Order book and matching engine	AMM pools or on-chain order books
Fiat deposits	Often supported	Generally not
Main risks	Hacks, insolvency, frozen withdrawals	Smart contract bugs, oracle issues, phishing
Costs	Trading and withdrawal fees	Trading fees plus network gas

For a deeper comparison, including how perp DEXs work, read CEX vs DEX.

Spot vs derivatives markets

Spot markets are where you exchange one asset for another and settle right away. If you buy 1 ETH with USDT on a spot market, you own 1 ETH and can withdraw it.

Derivatives markets trade contracts whose value follows an underlying coin. You do not own the coin, but you gain or lose as its price moves, and you can go short as easily as long. The main types are:

• Perpetual futures: contracts with no expiry that stay near the spot price through periodic funding rate payments between longs and shorts. Many CEXs pay funding every 8 hours, while Hyperliquid pays hourly.
• Dated futures: contracts that expire on a set date and converge to spot at expiry.
• Options: contracts that give the right, but not the obligation, to buy or sell at a set price.

Derivatives usually allow leverage, which multiplies both gains and losses and adds the risk of liquidation.

	Spot	Perpetual futures
What you hold	The actual coin	A contract on its price
Leverage	Not by default	Common
Can go short	Only by borrowing (margin)	Yes, directly
Ongoing cost	None for holding	Funding payments, positive or negative
Withdraw the coin	Yes	No

Exchange fees: a worked example

Most exchanges charge maker fees for orders that add liquidity to the order book and taker fees for orders that fill immediately. Taker fees are usually higher. See maker vs taker fees.

Assume you buy $5,000 of a coin with a market order, then withdraw it to your wallet. The fee levels below are assumed for illustration only:

Cost	Assumption	Amount
Taker fee	0.10% of $5,000	$5.00
Slippage	0.05% average fill above the quoted price	$2.50
Withdrawal fee	Flat fee set by the exchange	$1.00
Total cost		$8.50

Total cost is $8.50 ÷ $5,000 = 0.17% of the trade. For a long-term buyer this may not matter much. For an arbitrage trader chasing a 0.3% price gap, it removes more than half of the edge before the second leg is even placed.

Why prices differ between exchanges

Each exchange has its own users, liquidity and order book, so the price of the same coin can differ slightly from venue to venue. Small, less liquid exchanges tend to show larger gaps. Differences in fees, withdrawal availability and which network each exchange supports also keep gaps from closing instantly. This is the basis of crypto arbitrage.

How to evaluate an exchange

Beyond headline fees, a few checks tell you more about whether an exchange suits you:

• Liquidity for your pairs: look at order book depth and spreads for the markets you actually plan to trade.
• Supported networks: check which blockchains each coin can be deposited and withdrawn on, and whether they match your other venues.
• Withdrawal reliability: frequent suspensions for a coin can trap funds when you need to move them.
• Proof of reserves: some CEXs publish attestations that they hold customer assets, which helps but does not prove the absence of hidden liabilities.
• Access and rules: availability, KYC requirements and product restrictions differ by country.

Risks and common mistakes

• Custody risk: funds on a CEX depend on the company's security and solvency.
• Withdrawal suspensions: an exchange may pause deposits or withdrawals for a coin or network, sometimes without warning.
• Wrong network: withdrawing on a network the receiving venue does not support can lose funds.
• Thin markets: low-liquidity pairs have wide spreads and heavy slippage.
• Fake volume: high reported volume does not guarantee a deep market. Check order book depth and spreads, not just volume.
• Smart contract risk: on DEXs, a bug in the contract can put deposited funds at risk.

This article is education, not financial advice.

How ArbTide helps

The exchanges page lists the centralized exchanges and perp DEXs ArbTide tracks, and the live arbitrage scanner shows where the same coin trades at different prices, net of taker fees.