What are crypto exchanges?
Let’s consider this as a carnival counter where you can buy waffles but also sell the doughnuts that you made at home, making it a two-way road.
Similarly, a crypto exchange is a platform, or call it a marketplace where you can buy and sell cryptocurrencies, like Bitcoin, Ether, or Dogecoin.
You can use exchanges to trade one crypto for another — converting Bitcoin to Litecoin, for example — or to buy crypto using regular currency, as the U.S. Dollar $$.
You can also convert cryptocurrencies back into the U.S. Dollar or another currency on an exchange, to leave as cash within your account.
Trade Crypto Everywhere and Anywhere!
How does it function?
First things first, what an investor or a buyer wants to do is to find the correct online exchange. This initial step will be taking a huge good amount of research regarding the history of that platform, its credibility, security, withdrawal options, and lastly the benefits it holds for you while trading. Closing this procedure requires another small piece of work from your side because you can’t just buy crypto from your bank or investment firm hence, one needs to open a trading account that takes less than a minute.
You just have to download your favorite trading app, create an account there, do some privacy setups, set the password, and voila! You’re one hundred percent ready to enjoy your ride on the rollercoaster that is cryptocurrency.
Centralized Crypto Exchanges.
These are controlled by a central authority and act as a third party between a buyer and a seller. They function as trusted intermediaries in trades, enable faster transactions, and often act as custodians by storing and protecting your funds. These exchanges benefit you with consistently high liquidity. Well, the system being this trustworthy also introduces investors with some drawbacks which are
▸Centralized exchanges don’t provide private keys to access the wallets and also demands KYC verification,
▸These are at higher risks of cyber attacks too
▸Entrusting an exchange with your private keys means you don’t fully control your own money
▸They have a pretty high amount of fees for the services they provide
▸Several centralized exchanges have been accused of manipulating their opaque nature and conducting insider trading, fake volume, and price manipulation.
Decentralized Crypto Exchanges.
We’ve previously discussed the OG facts about decentralization and if you haven’t read that article yet, go fast and come within 3 minutes (just to let you know, we’re waiting for you to come back though)…
Hey, again fella! So you’ve read the decentralization article right? Now we can continue peacefully without any confusion and misconceptions. Hah!
Here on this exchange system, the trading is done on blockchain that comes with few advantages that are:
▸ Them exchanges provide investors transparency, security, privacy, and greater control over-trading.
▸These are free of depending on a specific company to control the assets of an investor
▸ Mitigating hacking risks
▸They can’t easily get shut down by the government.
▸ Anonymity
They work without an intermediary organization for clearing transactions, instead, they rely on self-executing smart contracts to facilitate trading.
Disadvantages of these exchanges include lower liquidity, slower transactions and they offer the only crypto to crypto trading.
What to look for in an exchange
Accessibility
Your location may prevent you from buying and selling crypto on certain exchanges due to state or national regulations. So make sure the exchange that you’re selecting has access to your area.
Security
The exchange security for you should always be the top priority. Look for general online security measures you may already be aware of on other platforms, for example, two-factor authentication. Look into how much of its assets the exchange keeps offline, it’s smart to keep the majority of holdings offline, or in cold storage where it’s super difficult for hackers to get in.
Liquidity
When you use an exchange that doesn’t come with a lot of trade volume, you could end up paying a higher price than you would on more popular exchanges. This happens, because crypto prices move along fastly. SO, if you in your mind are thinking to buy, sell, or trade your crypto, the exchange you choose should have enough trading volume to ensure your holdings are relatively liquid.
Coins provided
Not every exchange offers each of the thousands of cryptocurrencies that exist. So, wisely choose the one that has access to popular coins as well as newer altcoins. And with the altcoins, while buying any coin, only consider trading in a cash value that you are prepared to lose too.
Storage
“Once you become a little bit savvier, you may want to move your coins somewhere else,” Ross says. After learning more about storage options you may want to keep your crypto in the wallet and somehow can’t because you’re now struck as you decided to choose an exchange that didn’t have this option. We think keeping your crypto within your online account is a safe option. Exchanges that provide this option are called to be better than others.
Finest crypto exchanges of September 2021
Best overall crypto exchange
▸Binance.US with 4.9 ratings
Best beginner friendly crypto exchange
▸Coinbase with 4.5 ratings
Best of the rest
▸Kraken with 4.8 ratings
▸Crypto.com with 4.7 ratings
▸Gemini with 4.5 ratings.
▸KuCoin with 4.1 ratings.
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