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What Is a Crypto Exchange?

Crypto exchanges are a major part of this digital asset world. Here is a detailed overview of these services and how to choose the right one!
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What Is a Crypto Exchange?

Crypto exchanges are a major part of this digital asset world. Using these platforms is imperative for all traders, which is why you should learn more about them. Here is a detailed overview of these services and how to choose the right one!

Crypto Exchange – A Definition

Let’s say you need to exchange USD to GBP. You head to exchange to give USD and receive GBP according to the current rate. A crypto exchange is a platform that provides these services for cryptocurrencies. That means crypto exchanges allow users to buy, sell, and trade crypto.

You’ll find two main crypto exchange categories in the market – centralized and decentralized. Some platforms are hybrid, which means they are centralized exchanges with some decentralized finance features. We covered some in our best crypto exchange reviews if you’d like to check them out!

Types of Exchanges and Differences

CEX – Centralized Crypto Exchanges

If you ever traded stocks, these will remind you of conventional stock exchanges. A centralized platform acts as an intermediary in trades between two parties. These exchanges allow you to trade between two cryptos but also between crypto and fiat currencies.

You monitor the price available on the exchange and place an order if it meets your needs. The exchange keeps your funds safe and finds you a buyer to finalize the transaction.

Here is an overview of the main pros of using a CEX:

  • The transactions are less risky. Reputable exchanges keep your funds safe until the transaction finalizes.
  • Many currencies are available, including fiat money. CEX is a platform where you can acquire crypto with fiat but also trade between numerous crypto assets.
  • These platforms can be fast. A centralized crypto exchange processes transactions quickly, especially when there’s a large trading volume.

As for the cons of a CEX, they include:

  • Your privacy is limited. Most platforms will require verifying your identity, which compromises anonymity.
  • Fees can be high. The rates you pay per transaction can be high, which is also because CEX platforms take the majority of the market these days.

DEX – Decentralized Crypto Exchanges

Many argue that decentralized exchanges are the only ones true to the basic ideas of crypto. These include autonomy, anonymity, and security. DEX platforms are exchanges where you can execute crypto transactions without a third party involved. They facilitate P2P transactions that occur directly between two crypto traders.

These are the main advantages of using DEX platforms:

  • Privacy and anonymity. Nobody will require you to verify your identity at a DEX. There’s no third-party involvement, which also contributes to user anonymity.
  • Keep your funds safe. You don’t store crypto assets on the exchange at any moment. That means there’s no danger of hackers breaching into the platform’s database and stealing your funds.
  • Regulator resistance. Central authorities can meddle and even block some transactions with fiat currencies. That’s impossible to happen with crypto on DEX because regulators can’t see which transactions occur there.

The drawbacks of using a DEX include:

  • It’s not as fast as CEX. It depends on the platform, but the general speed is usually slower than on centralized platforms.
  • You can’t use fiat currencies. If you wanted to buy crypto with fiat, that’s not possible on these platforms.

Top Online Exchange Platforms

https://www.youtube.com/watch?v=Kbt0P-nJV7o
Best Crypto Exchanges 2021 ( Credit: Coin Bureau YouTube Channel)
 

These centralized crypto exchanges are popular among the users:

  • Binance. Despite only being on the market for several years, Binance has become a leading exchange in the industry.
  • Gemini. The platform is easy to use, although it comes with many supported currencies and advanced trading options.
  • Kraken. This exchange supports over 50 cryptos, and it allows you to start trading with low investments.

If you’d like to stick to DEX platforms, here is their selection:

  • Uniswap (v3). It’s a simple app that makes trading quick and easy.
  • PancakeSwap (v2). The platform has about three million users monthly, which speaks about its popularity.
  • Trader Joe. This platform supports Avalanche and gives excellent options to users interested in it.

Table of Contents

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