A Bitcoin exchange is a platform that allows users to buy, sell, and trade Bitcoin and other cryptocurrencies. These exchanges facilitate transactions between buyers and sellers, acting as intermediaries. Users can set up accounts on these platforms and deposit traditional currency or cryptocurrencies.

Once funds are available, they can place orders to purchase Bitcoin or trade it for other digital assets. Exchanges typically offer various trading options, including market orders, limit orders, and stop orders. There are two main types of exchanges: centralized and decentralized.

Centralized exchanges are operated by companies that manage the order book and transactions, providing greater liquidity and easier user experience. However, they also pose privacy risks and require users to trust the platform. Decentralized exchanges, on the other hand, allow users to trade directly with each other without an intermediary.

This can enhance privacy and security but might come with lower liquidity and more complex user interfaces. Overall, Bitcoin exchanges play a crucial role in the liquidity and accessibility of cryptocurrency markets.