Crypto has been making headlines for more than two years. Ever since the pandemic happened, it seems like people found a hidden gem in the crypto space, and Bitcoin blew up close to 70 000 dollars. A lot of senior investors don’t see the point in buying cryptocurrencies. But the younger generations are choosing this asset class because of a couple of reasons.
First of all, it’s modern, and it’s a way to avoid central banking that everyone’s sick of. Next, it helps you send money privately, and it also protects you from inflation. Not having crypto in 2022 is like refusing to get an email account in the early 2000s. Click here to read more.
Eventually, you’re going to need to have one. Cryptocurrency exchange platforms serve as the intermediary between dollars and cryptocurrencies. You can make money by investing, flipping, trading, referrals, commissions, and even transaction fees. There are plenty of benefits that you can experience overall.
What do exchanges do?
The primary purpose of each exchange is to let you exchange actual money for an equal amount in cryptocurrencies. When you type the price of an asset on Google, you can’t buy it directly. Let’s say that you want to get your hands on some Bitcoin. One of the ways you can get it is to install the main software on your computer and attempt to mine it.
Because there’s so much competition in the world, the chances of you succeeding are slim to none. The next thing you can do is to find a person who has some Bitcoin and ask them to send it to you while you give them cash on hand.
That’s not secure since they can run away or steal your money. The third option is to use an exchange. You’ll need to register an account and then insert your credit card details in order to buy some Bitcoin. As soon as you have it, you can trade it or convert it to other currencies.
What kind of exchanges are there?
The main distinction is between centralized and decentralized crypto platforms. The centralized versions are controlled by companies and are much more reliable compared to their counterparts. Recent statistics show that close to 99 percent of all crypto trading goes through centralized exchanges. They offer low trading fees and make the entire process pretty straightforward. Plus, if they get hacked, your money is secure because it’s insured.
That’s not the case with decentralized exchanges or DEXs. These platforms aren’t run by a company. Instead, they function based on an algorithm. Peer-to-peer transactions happen all the time, and crypto prices get updated based on arbitrage.
There’s no need for a company or a third party to overlook what’s going on because it’s all run by an autonomous algorithm. Visit cryptowealthbay.com for more info. Some users prefer this trading method because they don’t want anyone snooping on their behavior.
The thing that makes them different from their centralized counterparts is that they don’t need any user info. You can come in, do your business, and leave. There’s no need for an ID or a verification process before you start trading. Of course, that also means that you can’t insert your credit card and buy crypto with real money. You must have crypto assets before you can start using them.
What are the advantages and disadvantages of both?
Both types have their preferred user base. Centralized sites are more oriented toward their users. If you’re a complete beginner, then you’ll find a streamlined way to trade crypto. Setting up your own wallet and passphrase is difficult, and there are notifications and pop-up bubbles that show you the way.
You can easily see all of your transactions and balances and use simple toolbars to navigate. The same thing is true about reliability. There’s a higher level of comfort since the exchanges themselves set up the network for transactions. Before you hit the send button, they’ll notify you of potential mistakes, making sure that you’re sending money to the correct address.
The disadvantage here is the risk of a hack. Cybercriminals know where the money is, and they want a piece of the pie. Crypto companies have billions of dollars available at any moment, which makes them a prime target for attacks.
One of the biggest incidents in space was with Mt Gox. An exploit from hackers was used to steal more than 850 000 Bitcoin. The exchange was suspended immediately. Another disadvantage is the fees. Because you get a lot of conveniences, they make sure to charge each trade. That’s why people with more experience move their assets to a DEX.
The first benefit of DEXs is that they can’t be hacked. You can’t exploit an algorithm unless it was deployed with a bug. Plus, the more users there are, the harder it is to crack. These platforms don’t have any money available, and they only serve as a mediator between buyers and sellers.
The nature of a DEX is to allow peer-to-peer transactions. This makes them perfect for preventing manipulations that cause volatility on the market. Finally, there’s the anonymity aspect. You just need to create a wallet, and you can start trading. That way, no one will know who you are. You could have billions of dollars and will be untraceable.
However, there are disadvantages too. The first downside is their complexity. You must know how to use your private and public addresses, and you need to have a good grasp of which layer to send tokens to. That’s why most people start off on the easier version and then work their way up.
Another disadvantage is the lack of dollar payments. If you don’t have crypto already, there’s no way to get started. Finally, there’s the struggle for liquidity. Users need to lock up the same value of two crypto tokens to help the network run. For that, they’ve rewarded a part of the trading fees. If there aren’t enough people providing liquidity, then the exchange won’t work properly.
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Disclaimer: Blockmanity is a news portal and does not provide any financial advice. Blockmanity's role is to inform the cryptocurrency and blockchain community about what's going on in this space. Please do your own due diligence before making any investment. Blockmanity won't be responsible for any loss of funds.
