The best exchange for your goals is essential when you start trading or investing in cryptocurrencies. Several options are available if you are looking for the most currencies, the lowest fees, or the most effortless experience. Whether it’s Coinbase or Binance, all you require is a funded account, and you are all set to buy your first cryptocurrency.
It is crucial to fully understand the types of exchanges to choose the best one for you.
One of the most common types of exchange is a centralised exchange. Cryptocurrency exchanges facilitate trading cryptocurrencies for other assets, including digital and fiat currencies. Essentially, cryptocurrency exchanges are middlemen between buyers and sellers, earning a commission and transaction fee.
You can exchange $100 for bitcoin of equivalent value on common cryptocurrency exchanges and vice-versa. Similarly, you can trade bitcoin worth $100 for Ethereum of equal value. Moreover, you can apply this same concept to different assets based on the exchange’s offered.
Centralised cryptocurrency exchanges act as a third party between buyers and sellers. Moreover, since a company operates and controls them, Centralised exchanges offer more reliability. As a result, transactions are done almost exclusively on centralised exchanges like Coinbase, GDAX, Kraken, and Gemini in the crypto market.
Decentralised cryptocurrency exchanges or DEX allow users to execute peer-to-peer transactions without using a third party or an intermediary. Some users prefer DEXs because centralised exchanges have some issues. However, decentralised exchanges do not facilitate trading fiat currencies for cryptocurrencies. A few examples of DEX include AirSwap, io, Barterdex and Blocknet.
Advantages of Centralised Cryptocurrency Exchanges
Centralised exchanges offer beginner investors a familiar and friendly way of crypto trading and investing in cryptocurrencies. Instead of using crypto wallets and peer-to-peer transactions, which can be complex, centralised exchange users can log in to their accounts, view their balances, and make transactions through applications and websites.
Centralised exchanges offer additional security and reliability for transactions and trading. In addition, by facilitating the transaction through a developed, centralised platform, centralised exchanges provide higher comfort levels.
Advantages of Decentralised Cryptocurrency Exchanges
- Mitigating hacking risk
Users of DEX do not need to transfer their assets to a third party. Therefore, it does not risk a company or organisation getting hacked, and users have experienced more safety from hacking and theft.
- Preventing market manipulation
Due to DEX’s nature of allowing for the peer-to-peer exchange of cryptocurrencies, these decentralised exchanges prevent market manipulation, protecting users from fake and wash trading.
By removing know-your-customer (KYC) forms, decentralised exchanges allow users to remain anonymous and secure.
A cryptocurrency exchange is the only way to buy and sell cryptocurrencies. These online services work similar to a stockbroker and give you Ethereum, Dogecoin, and Bitcoins trading tools.
The best cryptocurrency exchange would make it easier in the crypto market to buy and sell the currencies you want with low fees and robust security features. And while choosing the best option for your needs, looking at supported currencies, pricing, withdrawal options, and security are essential.