If you are a cryptocurrency trader or investor, you must have come across cryptocurrency exchanges. These are platforms that allow investors to transact with cryptocurrencies conveniently. Having a centralized crypto exchange creates some level of confidence when investors are transacting. One may be confused when we talk about centralized exchanges as cryptocurrencies are decentralized. We will look at what it means to have a centralized crypto exchange and why it is useful for the success of the cryptocurrency markets.
In essence, when we talk about centralized crypto exchanges, we refer to the use of 3rd parties or middlemen to help in completing the transactions. This means that the buyers and the sellers of the coins will have a middleman handling their digital assets. This is a similar concept as that of a bank, where customers allow banks to hold their money. Centralization gives banks the confidence to act on behalf of the customer in various ways. This is the same idea when it comes to centralized crypto exchanges. In this case, the crypto traders and investors are confident that the exchange will complete all transactions safely.
Cryptocurrencies are known as digital currencies and are stored in virtual wallets. The unfortunate bit is that investors can end up losing all their cryptocurrencies by forgetting the private key to their wallets. When you are using an exchange, this is unlikely to happen as they will hold the digital currency on your behalf. It is imperative to understand the primary difference between decentralized and centralized crypto exchanges before making any form of investment.
Centralized Vs. Decentralized Crypto Exchanges
It is important to understand the difference between centralized and decentralized exchanges as a crypto investor. The centralized exchanges allow users to transact from crypto to fiat and vice versa. This type of exchange seems to handle all types of cryptocurrency transactions. However, there are other types of exchanges that you can use for other transactions. Decentralized exchanges are an alternative source and they will cut off the middle man or third parties. These are peer-to-peer exchanges and some investors do not have confidence in such environments. If you are trading on the https://bitcoin-billionaire.net/, it is important to be sure of the type of exchange you are using.
The key difference between decentralized and centralized crypto exchanges is the presence or absence of a middle man. While several investors show reservations for decentralized exchanges, there are so many that are becoming popular. If you want to use decentralized systems, it is best to trade in small amounts as you develop trust in the system. It is evident that there are more people who are gaining confidence in peer-to-peer transactions.
Why Centralized Exchanges Are The Way To Go
Centralized exchanges are being created every other day and there are so many of them. As such you can have different options to choose from. However, when choosing an exchange, it is important to pay attention to the trading volume. When an exchange has high trading volumes, it means that the market manipulation and volatility rates are significantly lowered. In addition, where there is a higher trading volume the transactions are processed swiftly and in a shorter period of time.
The most crucial trait you need to look for in a cryptocurrency exchange is security. Even with the understanding of the differences between centralized and decentralized exchanges look for one with enhanced security. Cryptocurrency investors need an exchange that they can transact for all their trading activities.
With this simple guide, we hope that you have a better understanding and would be able to pick an exchange that serves your interests in the best way possible.