Cryptocurrency exchanges are online platforms in which you can exchange one kind of digital asset for another based on the market value of the given assets.
Every exchange is hosting a list of cryptocurrencies and tokens and generate an address for these assets for their clients. The client then is able to send (deposit) a number of coins to his generated address and open a sell order with the desired price either in Bitcoin or in any other coin that he would like to obtain and which the exchange is providing as a trading pair. For example the client is depositing 1000 digibyte coins and he wish to buy BitcoinZ coins with them. He can create a sell order , buying directly BTCZ if the exchange is offering a DGB/BTCZ pair with the exchange’s DGB/BTCZ exchange rate. Otherwise he has to sell the DGB for Bitcoin and then to set a BUY order , using his Bitcoin for getting the desired BitcoinZ coin of our example.
Usually the most exchanges are offering trading pairs including at least BTC and many times other popular cryptos like Ethereum or Litecoin.
After a trade, the user can take back any coins to his personal wallet for the specific coin type or to his multiwallet , asking for a withdrawal. There are some exchanges which offer trading pairs of cryptocurrencies, especially of the most popular like BTC and ETH, with FIAT currencies like euro and dollars. This way the user can sell any cryptocurrency and get euro, dollars and other printed currencies.
We should add that the clients should always be careful to not forget funds in exchanges’ addresses and to always use their own wallets for storing them. More info about this in the article “How to avoid traps in the cryptospace”.
Furthermore , the potential clients should be always very careful in choosing which exchanges are going to trust for their transactions because the exchanges are not always trustworthy. You can get more information about this in this guide of “Choosing a trustworthy exchange”.
Finally it is important not to confuse cryptocurrency exchanges with cryptocurrency brokerages. Brokerages are platforms which offer leverage for trading cryptocurrencies without necessarily really owning them quite like the forex brokerages do with the CFD (Contracts for Difference) for the stocks and the classic printed currencies.
Please have always in mind that each cryptocurrency exchange is unique and has its own set of rules and client base. Cryptocurrency exchanges are completely independent businesses and are not controlled by the digital coin developers. You should always make a research for reviews, verifying their trustworthiness before using them. Furthermore , you should never use an exchange account for storing digital coins as there is always a possibility to lose your funds!