Cryptocurrency is a digital currency that uses encryption to preserve its value. What powers it is the blockchain technology. Blockchain is concerned with data structure and allows the establishment of decentralised digital ledgers in which single entities cannot influence transactions. The two most widely used cryptocurrencies are Bitcoin and Ether, which drive the Ethereum network. The term “cryptocurrency exchange” refers to a venue where anyone can buy or trade cryptocurrency. Although each cryptocurrency exchange has its own set of laws and restrictions, they all give users access to the most popular cryptocurrencies. The most common forms of interactions are centralised cryptocurrency and decentralised cryptocurrency.
A centralised cryptocurrency exchange is a marketplace where users can buy and sell digital assets. In this case, you’d need the assistance of a third party to oversee the transaction and protect both the buyer and seller. Their transactions are unrecorded on the blockchain. To validate such trades, you’ll need to use your personal information. If you’re a company, you’ll need to provide information about your company to verify your account. In case of technical difficulties or password loss, verified users can contact the platform support staff. These platforms are popular among cryptocurrency users and are on every website that offers bitcoin trading. Centralised crypto exchanges usually provide their subscribers with flat pairings at consistent pricing. Other centralised cryptocurrency exchanges include Binance, Coinbase, Local Bitcoins, etc.
Centralised Bitcoin exchanges act as a middleman between buyers and sellers. They are more dependable because they are managed and regulated by a company. They handle more than 99 per cent of all bitcoin transactions.
New investors can trade and invest in cryptocurrencies through centralised exchanges, which are familiar and comfortable. Users of centralised exchanges may log into their accounts, view their account balances, and make trades via applications and websites, rather than requiring crypto wallets and cumbersome peer-to-peer transfers.
A DEx, or decentralised cryptocurrency exchange, is similar to a centralised cryptocurrency exchange. However, it does not rely on a third party. They are complete decentralised platforms that provide peer-to-peer (P2P) trade using assets, proxy tokens, and an escrow mechanism, rather than IOU-based systems that require centralised exchanges, as opposed to IOU-based systems that require centralised exchanges.
Examples of Decentralised Exchange
There are too many decentralised exchanges out there. Newbie traders find it hard to choose one that fits their needs. To overcome this challenge, most of them ask for advice from professional crypto advisers. And they do that through platforms like Yuan Pay Group, which connects traders with trustworthy brokers that will support their steps into the crypto world. Beginners can also go to crypto websites that provide reliable information about the best platforms in the market. Coinmarketcap is a good one. It lists Uniswap (V3), dYdX, PancakeSwap (V2), Serum DEX, and SpookySwap as the top five Cryptocurrency Decentralized Exchanges based on trade volumes and market share in Defi markets.
These exchanges are decentralised and operate without the involvement of a third party, as the name implies. Users can perform peer-to-peer (P2P) transactions on decentralised cryptocurrency exchanges. This process makes use of automated smart contracts. However, not all decentralised exchanges have the same architecture.
Why use Decentralized Cryptocurrency?
DEXs should be your first choice if you want complete privacy because they are anonymous. Although DEXs operate on the principle of anonymity, centralised crypto exchanges may request know-your-customer (KYC) information.
Centralised exchanges bear the higher cost of constructing and maintaining infrastructure to provide security services. In contrast, Decentralised crypto exchanges work on the principles of automation and self-regulation, making them less expensive. DEXs might help you cut down on all of the unnecessary fees.
With a decentralised exchange, hacking is almost impossible. If you are an investor most concerned about hacking concerns, this is the best alternative. It’s less vulnerable to hacking since you don’t have to swap assets with a third party in the middle.
You have complete control over your cash and wallets. You do not need to transfer funds to a wallet or any trading accounts to complete transactions. After all, an e-wallet, similar to a centralised trading platform, enhances the stakes.
The decentralised exchange has its drawbacks, one of which is that it does not commence the trading of fiat currencies. Decentralised crypto exchanges, unlike centralised exchanges, do not offer user-friendly features. DEXs may be somewhat complicated. Decentralised or centralised, both have pros and cons that you should weigh. You must pick a platform that best suits your wants and interests as a crypto trader and investor. Make sure the platform you’re utilising can guarantee the safety of your crypto assets and that their transactions are reliable.