Though the crypto sector has crossed its infancy, many individuals are still unaware of cryptocurrency. Bitcoin was the first to see the sunshine in January 2009, and later, hundreds of crypto coins have emerged and are available on the most popular cryptocurrency exchanges.
Moreover, owning popular cryptocurrency exchanges with considerable daily revenues is one of the crypto world’s biggest businesses. New ideas emerge daily, such as decentralized exchanges and derivative exchanges. For a trader, it is a must to keep abreast of the basic knowledge of the crypto exchanges.
Today, you will learn the different kinds of popular cryptocurrency exchanges while comparing decentralized, centralized, and hybrid exchanges to help you understand the difference.
Types of Cryptocurrencies Exchanges
The most popular cryptocurrency exchanges are classified into three types. It includes:
- Centralized Exchanges
- Decentralized Exchanges
- Hybrid Exchanges
Centralized Cryptocurrency Exchange
In the crypto world, centralized exchanges are the most popular and traditional exchanges. They are governed by a corporation that provides crypto-to-crypto trading and a fiat-to-crypto trading option. Centralized exchanges are a digital marketplace where buyers and sellers meet on a centralized platform, implying that someone is in charge of and accountable for cryptocurrency. You can use order books for your trades, as well as technical analysis tools on some popular cryptocurrency exchanges.
The main benefit is that centralized exchange is pretty simple to use and has an excellent interface and quick response time. You can be confident that these exchanges have a good reputation and have a lot of trade volume and liquidity. Some popular cryptocurrency exchanges go even farther and provide liquidity aggregation, which is a process that collects buy and sell orders from many sources and offers traders prices that are near to market average.
They also offer services like Defi. Some of you may be wondering what Defi or decentralized finance means in cryptocurrency. In a nutshell, these are instruments similar to those found in the banking sector, such as crypto lending and borrowing, but without the need for a middleman.
However, because you do not hold private keys while using centralized exchanges, there is still a danger that they could be hacked, as happened with several popular cryptocurrency exchanges. Some people are also hesitant to share their personal information during the KYC procedure; thus, this could be a hurdle for some.
Coinbase, Binance, and Huobi are the most popular centralized exchanges.
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Decentralized Cryptocurrency Exchange
Decentralised exchange differs from the centralised exchange because there is no single point of failure, and no single company owns the assets. Unlike traditional centralised exchanges, smart contracts and decentralised programs automate transactions and trades. This solution is significantly safer since no security compromise is possible as long as the smart contract is written correctly.
Most decentralised exchanges use Ethereum and its smart contracts since it is the most advanced blockchain with the highest number of tokens (ERC-20 tokens). It could be improved by implementing decentralised finance on an interoperable platform like Cosmos or Polkadot. Ultimately, trading limitations will be substantially lower as a result of their use.
A decentralised crypto exchange list coins like Ethereum, Litecoin, Dogecoin, and Stellar. Furthermore, because no single corporation is accountable for the operations of decentralised exchanges, governments and regulators find it more difficult to shut them down. Some popular cryptocurrency exchanges cater solely to expert users. You can’t get in touch with customer service for help on a decentralised exchange, and they don’t have a fiat-gateway like a centralised exchange.
Uniswap and Binance DEX are the most popular cryptocurrency exchanges right now.
Hybrid Cryptocurrency Exchange
The term “hybrid cryptocurrency exchange” refers to an exchange that combines the benefits of both centralised and decentralised exchanges. The hybrid cryptocurrency exchange was created due to the constraints of both centralised and decentralised crypto exchanges. It’s a combination of centralised platforms’ rapid transaction speeds and security assurance that keeps the private keys.
A hybrid cryptocurrency exchange is a new cryptocurrency trading platform and is still under development. The monies are entirely under the control of the users and are not required to turn them over to a custodian. While depositing tokens into the robust smart contract, you can trade digital assets straight from your wallets. The hybrid cryptocurrency exchange is unquestionably the crypto trading platform of the future.
Nash and Qurrex exchange are the two most popular cryptocurrency exchanges in the crypto market.
So, now it’s up to you to decide which type of cryptocurrency exchange will best suit your requirements. For example, if you want to exchange cryptocurrency with fiat money, you need to use centralised or decentralised exchanges. The same is true if you will trade a wide range of altcoins. Even the top 10 crypto exchanges are typically limited to ERC-20 tokens or a small number of cryptocurrencies.
Traders willing to keep track of their transactions and taxes information can do it with the help of some centralised exchanges.
Decentralised exchanges and hybrid exchanges cater to more experienced users who rely primarily on their tangible wallets and desire complete control over every Satoshi. However, they forego some benefits of centralised exchanges, including high trade volumes, Defi products, etc.