Cryptocurrencies such as Bitcoin and Ethereum is money, all in the digital form from the start. It is an alternative to fiat money, such as the U.S. Dollar. Fiat money is issued by a government, and is backed by the issuing government. But for those who need money in a currency that is NOT tied to a government, cryptocurrencies offer an alternative. You can buy things, save crypto, transfer crypto - just like you can with fiat money.
Currently to have cryptocurrencies such as Bitcoin or Ether, you need to either 1) have mining hardware and earn crypto doing work 2) buy crypto using fiat money. The latter is done through a centralized exchange (CEX).
A quick look at the two types of crypt exchanges:
- Centralized Exchanges (CEX) : Robinhood, crypto.com, Biance, FTX, Kraken. Centralized because a third party middleman is involved. Which defeats the "decentralization" edict of using crypto and blockchain.
- Decentralized Exchanges (DEX) : UniSwap, SushiSwap. Decentralized because no third party middleman is involved. Transactions are purely peer-to-peer. But to facilitate transactions so that they happen immediately, market makers provide liquidity. Read more here.
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