A platform that entertains customers to exchange digital currencies for assets is known as a cryptocurrency exchange. The latest revolution in the trading industry is where people can make money by trading or purchasing digital currency. A different form of payment is offered in return for exchange. However, there is a nominal fee for this service. There are fundamentally three types of cryptocurrency exchange that are known, Centralized Exchanges (CEXs), Decentralized Exchanges (DEXs), and Hybrid Exchanges (HEXs). According to Forbes, “despite recent setbacks, cryptocurrency has remained a popular new asset class for investors. Among the top Google searches for 2022, Bitcoin beat out TikTok, Apple, and NFL.”
Crypto trading is a complex phenomenon. Before investing money, it is important to analyze the types of exchanges and their procedure. You can read in detail about cryptocurrency exchanges on wellcrypto.
Keep reading the article if you are interested in crypto trading and want authentic knowledge about the exchanges.
Types of Cryptocurrency Exchanges
Growing-up and slowing-down speed of the crypto market make it as vibrant as stock exchanges with few similar characteristics. For example, one can convert, sell, and buy digital currencies. Nevertheless, various methods and procedures are necessary to be adopted. In general there are three types of cryptocurrency exchanges.
Centralized crypto exchange works like a uniform authority under various exchanges. It performs functions like a mediator between buyer and seller with the help of a company. Most of the crypto exchanges happen through this platform. It offers more secure transactions than the untraditional mode of digital exchanges.
Some of the characteristics of centralized exchanges are:
- The money is given to the exchange platform, which acts as a middleman between buyer and seller—a trusted medium to run the deals.
- After analyzing cryptocurrency rates, you can exchange them with other digital currencies. The exchange plays its role in helping you to find a buyer.
- Some companies provide crypto/crypto exchange, and some of them are Binance, Huobi, KuCoin, and Bitfinex.
- Furthermore, some companies provide fiat/crypto exchanges. These exchanges were quite popular among the ones who had just started this exchange business. Some of the popular companies that provide fiat/crypto exchange are
- Coinbase is the most trustworthy of all cryptocurrency exchanges. It is more secure and safe to make transactions from your account. It helps you find a buyer. Coinbase upheld Ethereum and Bitcoin etc. they are most popular coins and the best cryptocurrencies for beginners.
- Bittrex provides some security feature that helps to secure the funds. Through cold storage, it keeps the account safe. It has an authentication procedure that includes IP address and wallet. Bittrex supports various pairing such as Bitcoin, Ethereum, Tether, and USD.
- Including coin base, the Kraken crypto exchange is also the most trusted platform for exchange purposes. It offers a variety of fiat/crypto pairing in different currencies. It was founded in San Francisco in 2011, one of the earliest exchange.
- Gemini offers a good opportunity for newbies and experienced exchangers. It is a user-friendly platform with a hot wallet, the leading security feature, and efficient customer support service. It is one of the best platforms for trading cryptocurrency.
Centralization of any authority leads to the concentration of power, wealth, and resources. The same is the case in cryptocurrency. There were inherent flaws like centralized exchange; therefore, the decentralized system was introduced to address these issues. One hallmark of DEXs is that it has eliminated the middle man from trading. It offers direct transactions between the buyers and sellers, also called peer-to-peer trades in the crypto market. The benefit of a decentralized exchange is that there is no central authority or mediator. It offers a high-security system to buyers and sellers. The owner has command over the account by having private keys and control of assets.
There are also some negative aspects of a decentralized exchanging system. It has some vulnerabilities like slow transactional process, no complex exchanges, or locking oneself out of money. Some of the popular DEXs exchanges are:
- The technological revolution leads the contemporary world. Traditional money models are changing the dynamics of exchange. In such an environment, IDEX is one of the safest exchange platform. You do not need to pay any money for the transaction. This platform is fundamentally for trading Ethereum.
- Waves Dex is one reliable trading platform. It primarily focuses on digital assets and waves assets. The exchanges comprise Ethereum, Bitcoin, Litecoin, etc. These cryptos have their token waves. Interestingly, there are options to trade fiat currency in Waves Dex.
- Stellar DEX is another decentralized system that converts and exchanges currency on the network. The ledger is the tool to accumulate balances and orders for selling and buying any asset. It can store Ethereum, Bitcoin, Litecoin, and Ripple. Some of the fiat currencies are also supported by Stellar DEX.
- The peer-to-peer network is provided to trade and exchange in Bisq DEX. It is quite different from brokerage accounts, with some advantages and disadvantages. It works on a decentralized exchange program with multiple options available. It takes no time in approved and has no unlimited restrictions. Most importantly, Bisq DEX is far secure because of the control in your hands. However, it is not available to everyone, and the application procedure is too simple that there are potential threats of fraud in this platform.
Hybrid exchanges are a new generation of crypto exchanges that merge the best of centralized and decentralized exchanges. Hybrid is somewhat called the amalgamation of various things. Thus, Hybrid digital currency exchange is a mixture of DEXs and CEXs characteristics. The free space between these two exchanges for trades is known as Hybrid exchange (HEXs).
For blockchain technology, it is really helpful to provide solutions to the problems traders face during making an exchange. The primary aim of a Hybrid crypto exchange is to address the pitfalls of the other two exchanges while keeping in mind the smooth transactions. The most interesting fact about HEXs is that they have complete control over the account and disallowed any middle intervention between the exchanges.
The significance of Hybrid exchange is that it provides a track of day-to-day practices and operations with a high transactional speed process. It provides a communication network between the customers and the authentication process for reliable security. Middleman intervention is made obsolete in this platform. Hybrid exchanges allow both crypto/crypto and fiat/crypto exchanges.
These types of cryptocurrency exchange are valuable for the smooth functioning of the digital exchange platforms. As you can check in the Binance review, these exchanges provide an opportunity to trade multiple cryptocurrencies. People who invest money need safe and secure platforms for transactions and dealings. With the improvement in exchange methods, people are developing trust in these hubs by removing middlemen and getting complete autonomy of their assets. Centralized, decentralized, and hybrid exchanges have changed the dynamics of blockchain technology and can increase further by facilitating the users.