Exchanges are a crucial and perhaps the largest part in Crypto space. Those who are fresh for cryptos might not be really well-versed regarding the crypto exchanges and their roles. The basic knowledge of crypto-exchanges will help those potential investors who want to get into the crypto arena with an obvious motive..to earn returns.
Cryptocurrency exchange firms mainly operate to build and develop the platform on which the users can buy sell or exchange crypto money. However, there is much to know about the digital currency exchanges.
Basically, there are two types of crypto exchanges: (1) Centralized and (2) De-centralized. Both types of exchanges operate in the crypto market in different ways, as they are unique at a very fundamental level. Both works on varied functions for the users base. First of all, we can have a look at Centralized Crypto Exchanges.
Centralized Crypto Exchanges
Centralized crypto exchanges work under the authority of a single entity. Such exchanges are operated and controlled also by a particular entity. An individual or a firm that owns the exchange is responsible for supervising and processing all the transactions and exchanges made by the users on the exchange platform.
Sometimes, these centralized crypto exchanges work with the traditional financial institutes. They also offer services like fiat-to-crypto transfers. Another factor of centralized crypto exchange is that it demands many details of a user in order to execute their KYC/AML procedures. These exchange platforms generally charge a transaction fee from the user for trading through it. As all the exchanges work with different interfaces, the fees will be varied.
De-centralized Crypto Exchanges
As the name signals, this type of exchanges are not bounded by a central authority, that can control and oversee the operations taking place on the exchange platform. Because of the lack of a controlling entity, no intermediary party between the traders to buy and sell the crypto assets exists.
A major characteristic of Decentralized crypto exchanges is the fact that these platforms give the entire control of the transactions and exchanges to the users only. Such exchanges offer services as peer-to-peer platforms. Although, because the centralized exchanges posses the control over the user transactions, while decentralized ones don’t, decentralized exchanges seem less safe. But, in fact, the whole crypto world cannot guarantee customer’s financial safety as it is quite a bit vulnerable to the incidents of hacks and thefts.