Let’s Understand Different Types of Cryptocurrency Exchanges!

Written by Ryan Green
2 mins, 50 secs Read
Updated On November 22, 2023

Cryptocurrency exchange accounts are a mandatory aspect of this marketplace and devoid of digital currency exchange; sellers and buyers cannot smoothly execute making and taking orders. If the virtual exchange had not existed, sellers would have been looking for buyers to buy their cryptocurrency assets. 

In short, we cannot imagine this industry without a cryptocurrency exchange. Cryptocurrency exchanges are broadly categorized into two parts. One is centralized, and another one is decentralized. Are you interested in bitcoin trading? Visit http://btcrevolution.io/ to know more about this process. But, first, let’s discuss a different kind of cryptocurrency exchange. 

Centralized Cryptocurrency Exchange

The usual type of cryptocurrency exchange is the centralized one. Profound digital currency categorized under this umbrella term is Coinbase, Binance, Robin Hood, Gemini, Wazir X, and many more. Centralized exchanges have acquired customers’ trust and are more easily found than decentralized ones. 

These cryptocurrency exchanges refer to private firms offering different tools to trade in digital currencies. The highlighting feature of this kind of cryptocurrency exchange is the KYC program. To avoid scams and other frauds, a centralized cryptocurrency exchange takes measures to know your customer program. 

The above-listed digital currency exchange seems to have a very magnificent trading volume. However, a high trading volume on a cryptocurrency exchange depicts that the spot value of any virtual currencies trading on such platforms gets updated very quickly; in short, there is no opportunity for arbitrage trading in these exchanges. 

The profound centralized exchange platforms are straightforward to use and reach exchange platforms. Usually, centralized cryptocurrency exchange comprises the feature of a custodial wallet, and the funds you store in the user account of the centralized exchange go into the custodial wallet. 

Decentralized Exchange

Both types of cryptocurrency exchange operate in a very similar manner but with different attributes. People draw an analogy between bitcoin and decentralized exchange as both of these structured platforms have implicated the concept of peer to peer. 

The decentralized platforms are devoid of any centric point of governance. Decentralized cryptocurrency exchanges do not register with any parties, and the government advises different centralized exchanges to register with. 

The decentralized exchange comes with a peer-to-peer, making the transaction speed on this platform slow. Moreover, these exchanges are devoid of the know your customer program, which undermines the anonymity features. 

Trading volume on decentralized exchange is usually significantly less than centralized exchange as people trust a decentralized exchange more than a decentralized one. Therefore, people seek opportunities for arbitrage trading on decentralized platforms.  

Frequently Asked Questions

Ans: Several factors are deciding which cryptocurrency exchange you should choose. First, it is mandatory to acknowledge how a cryptocurrency exchange stores your funds to transfer them to a custodian wallet or keep it in the cloud wallet.

There are two usual digital currency exchange formats: decentralized and centralized. The decentralized exchange comes up with no regulations and is not registered with any government bodies. They might sound illegal, but the main motive of these cryptocurrency exchanges is to maintain users’ secrecy. Decentralized exchange levies fewer transaction fees.

Ans: First, decide whether you want to execute buying orders on a decentralized or a centralized exchange. After sorting this category, you need to deposit some funds in the user account if the exchange demands users to deposit funds at first. Later choose the cryptocurrency you want to buy from the trading list and proceed to the payment part of that selected crypto price

If you have already deposited the funds, it will automatically deduct the definite amount. However, if the cryptocurrency exchange does not demand you deposit funds before placing the order, several payment methods will be shown. Currently, the trending payment methods include a peer-to-peer exchange.

In a peer-to-peer exchange on cryptocurrency exchange platforms like binance, buyers and sellers can communicate. Once the buyer has received the payment, the seller releases the asset into the buyer’s user account. One can choose payment methods like bank transfer and debit card.

The above-listed portion describes the differences between the two types of cryptocurrency exchange. With this understanding, you can now trade crypto more quickly and effectively.

Author: Ryan Green