Cryptocurrency exchanges facilitate transactions and trading between cryptocurrencies. The exchanges act as intermediaries between buyers and sellers and make their money through commissions and transaction fees. For instance, if a person wants to exchange Bitcoin with Ethereum, the crypto exchanges facilitate this transaction. Crypto trade website Knowing the top crypto exchange, which can be centralized or decentralized, is vital. Let us look at centralized and decentralized crypto exchanges to help you understand how the two differ.
Centralized Cryptocurrency Exchanges
Centralized crypto exchanges are the third party that facilitates the exchange between the buyer and the seller. They are more reliable because a company controls the exchanges. In fact, more than 90% of the transactions are centralized.
The Pros of Centralized Cryptocurrency Exchanges
As mentioned earlier, these exchanges are reliable because a specific company controls them. The company provides an added layer of security, making them more reliable and comfortable to use.
The exchanges are also easy to use, even for beginners. Unlike other complex exchanges, centralized exchanges are user-friendly. You log into your account, view your balance and make transactions via applications.
The Cons of Centralized Cryptocurrency Exchanges
- High Transaction Fees
Unfortunately, the conveniences mentioned above come at a price. You will need to pay the transaction fees, which can sometimes be high depending on how much you transact.
- Risk of Hacking
Since they are operated by companies that hold large amounts of cryptos for their customers, these companies are often a target for thieves and hackers.
Decentralized Cryptocurrency Exchanges
Decentralized crypto exchanges are different from centralized exchanges. In this case, you can carry out peer-to-peer transactions without requiring an intermediary. Many people prefer these exchanges because of the issues associated with centralized cryptocurrency exchanges. However, they do not support the trade of fiat currencies.
The Pros of Decentralized Cryptocurrency Exchanges
The good thing about these exchanges is that they offer privacy. You only know the information about our transaction.
- No Market Manipulation
With decentralized exchanges, you don’t need to go with the market. They protect you from wash trading and fake trading.
- No Risk of Hacking
You are not dealing with a third party here that holds your currency. Therefore, there is no risk of hacking, which is crucial for safety.
The Cons of Decentralized Cryptocurrency Exchanges
These exchanges are complex in that you must remember your password and key to your crypto wallet. Failure to do that you lose your assets forever. Therefore, you must have a user name and know the platform well. Therefore, decentralized crypto exchanges are not user-friendly.
- No Fiat Currencies Trading
The exchanges do not allow the trading of fiat currencies. Therefore, they are inconvenient for users without cryptocurrencies.
- Liquidity Problems
Unlike centralized exchanges, decentralized exchanges lack trade volume, making liquidity hard. This makes it difficult to find sellers and buyers with low trade volumes.
These are the differences between centralized and decentralized cryptocurrency exchanges. From the look of things, both have their negative and positive sides. You need to know the right choice based on what you need.