In the modern world, cryptocurrency is becoming more and more popular. Now is the perfect time to explore this area, because this industry is still in its infancy. Many are already familiar with this area, and some have already managed to earn a million dollars. But before starting work, it is very important to choose a crypto exchange. In this article, you will learn what types of them exist and which one is right for you.
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In the digital world, cryptocurrency exchanges are simply necessary to acquire, sell assets and perform other operations. Since this topic is quite popular right now, there are so many exchanges that compete. Some provide a feature that allows you to use a credit card to purchase crypto assets. Others are attracted by the simplicity of the interface, low commission and many other innovations.
Types of online platforms
Let’s look at what platforms exist:
- A broker that helps carry out trade and exchange. He takes a commission for his services, but usually guarantees the effectiveness of his help.
- Classic – those where you can also use fiat money to conduct asset transactions.
- PSP – this type of exchange works not only with cryptocurrency. Here you can buy assets of companies or individuals.
- Derivatives – here you have the opportunity to trade the price of the underlying asset.
You can choose an online platform for work based on what exactly you will do and what goals you have in stock trading.
Types of cryptocurrency exchanges
There are 3 types of exchanges in total. But today, we all understand that the world is developing very quickly and many interesting innovations may appear.
These exchanges have the security feature that you are the owner of the private key. There is also a CEX (someone responsible for holding your assets) and a DEX (a seller who sells tokens joins with a buyer). These exchanges appeared on the World Wide Web relatively recently and are now beginning to gain momentum, but are already popular among professional traders.
This type of cryptocurrency exchange is the most popular and well-known. Both professionals and beginners trade here. These exchanges are owned by other companies that control the platform and this is an advantage. Here you can trade not only cryptocurrencies, but also fiat money. Usually, centralized exchanges are pretty easy to figure out despite having a lot of features. On more advanced exchanges, you have the opportunity to take advantage of the tools for the technical market. Thanks to this, you can conduct your business more professionally.
Advantages: extensive functionality for trading (trading tools); the ability to work with fiat; liquidity; the ability to add assets to the listing).
Disadvantages: risk of hacking; price manipulation; lack of anonymity (you need to go through the verification process).
This is a more innovative exchange, so it will be difficult for beginners to understand here. On decentralized exchanges, all transactions related to transactions are automated. It is almost impossible for hackers to break into these exchanges, as smart contracts are usually well written here. Most decentralized exchanges operate on blockchains with a large number of tokens and on smart contracts. This is the reason why you will not be able to trade Bitcoin here.
Advantages: anonymity (no registration required); security of funds (the exchange does not store user funds); no one will be able to block your account; the owner has the private keys in his hands.
Disadvantages: limited set of functions (no margin trading); lack of technical support (all processes are automated); low liquidity.
The difference between centralized and decentralized exchanges
In simple terms, this can be said as follows: centralized exchanges have a management that is responsible for almost all transactions, confidentiality, storage of trading history, platform operation. Management also decides on innovation and further development. Decentralized exchanges work automatically, which makes them more advanced and more complex. If centralized exchanges require registration in order to be able to trade, then decentralized exchanges just need to open a cryptocurrency wallet (since confidential user information is not stored). The user is solely responsible for all funds and transactions.
Which exchange to choose is up to you. Decentralized and hybrid exchanges are suitable for more advanced users who have the ability to fully manage assets. There is more privacy and anonymity, so you can be sure that your data is safe. Centralized exchanges will help you approach trading more professionally, as there are many features and add-ons that help you earn more. If you are a beginner and just starting to explore the world of trading, you are better off working with a centralized exchange, as it is easier to understand here. Also here you can track the statistics of your trades and manage taxes.
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