Exchanges are places where you can turn one kind of digital asset into another. Cryptocurrency exchanges do this through trading pairs. A trading pair is a market between two assets, like Ethereum and Bitcoin, allowing you to trade one for the other.
Many exchanges only support crypto trading pairs, but a few also support fiat trading pairs like the US dollar and bitcoin, allowing you to trade fiat for a crypto asset. A centralized exchange takes custody of your funds to trade. Because many of these exchanges are unregulated, you should carefully research an exchange before giving them your assets.
A new wave of decentralized exchanges, called DEXes, are emerging and let you trade directly from your wallet but are early in development and technically limited. Cryptocurrency exchanges are powerful tools that enable savvy crypto investors to gain access to liquid markets and a large number of digital assets.