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Types of Crypto Exchanges: Here’s What You Need To Know

Beginner Jan 17, 2023

Crypto exchanges are helpful in allowing traders to buy and sell cryptocurrencies.

As an individual, traders should consider their goals and the risks they might take before diving into crypto trading. Most importantly, they have to be familiar with how cryptocurrency exchanges work first, before choosing which one to use.

Below are a few types of crypto exchanges available in the market today:

1. Centralized Exchanges

Centralized Exchanges or otherwise known as CEX, are similar to the traditional stock exchanges in the market today. It acts as a middleman for buyers and sellers of cryptocurrencies wanting to acquire or sell virtual assets.

As it is ‘centralized’, traders are trusting somebody else—a central authority—to handle their cryptocurrencies. It is overseen by a third party that ensures customers sign-up and trading runs smoothly and efficiently.

Notably, centralized exchanges allow trading with both fiat currency and other cryptocurrencies.

2. Decentralized Exchanges

Decentralized Exchanges or otherwise known as DEX, are platforms that facilitate peer-to-peer trades. It aims to stay true to the very nature of cryptocurrencies and blockchain—decentralization, without a middleman to handle traders’ funds.

Since it conducts peer-to-peer trades, traders come to the platform to conduct the transactions directly with each other.

In addition, most experienced traders go to this kind of exchange as it needs more technical skills to navigate. Moreover, because it has no central authority, traders are expected to be responsible and accountable for their funds and their private keys.

Centralized Exchange vs. Decentralized Exchange

CEX	DEX
Advantages
1. Excessive trading volume 2. A high level of liquidity 3. Trading from fiat to cryptocurrency 4. Crypto-to-fiat exchange 5. Extensive functionality 6. Simple to use 7. Transactions that are completed quickly	1. Security against hackers 2. Reduced fees and costs 3. There is no deception. 4. Allows integration of DeFi and NFT 5. A wide range of tokens 6. Independence from government control
Disadvantages
1. Vulnerable to hacks 2. Gathers extensive data from their customers 3. Custodial	1. Less liquidity 2. Limited performance

Conclusion

It is critical to have a thorough understanding of the various types of crypto exchanges when selecting the right one to use. This will allow you to determine the best crypto trading platform that meets your needs and, as a result, which will be the most convenient for you to use.

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Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.

A Beginner’s Guide to Crypto Exchange

Beginner Jan 17, 2023

Binance, Kraken, Riverex, Pancakeswap—these are all examples of crypto exchanges present in the crypto space today. These crypto exchanges hold important functions for traders because these exchanges allow them to buy and trade cryptocurrencies.

Cryptocurrency 101: What is a crypto exchange?

By definition, a crypto exchange is a platform where traders buy and sell cryptocurrencies and digital assets. This is where traders trade one cryptocurrency for another or buy cryptocurrencies using fiat currencies.

Instead of traders agreeing upon an exchange rate and sending coins directly to their fellow traders, crypto exchanges expedite and simplify this process. Crypto exchanges make the process of trading and procuring cryptocurrencies easier and more convenient for crypto users all over the world.

Types of Crypto Exchanges

Centralized Exchanges (CEX): What is CEX exchange?

Centralized exchanges (CEX) are often the perfect choice for beginners. It has a user-friendly interface with all the functions needed in trading. Centralized exchanges (CEX) have KYC requirements, to comply with anti-money laundering regulations. In this sense, it has an ‘official’ feeling to them as the process is somewhat similar to that of brokerage accounts or opening a savings account.

Another thing to note, a centralized exchange uses a third party in conducting transactions, as well as in offering them security and monitoring. This central authority, however, has access to users’ funds and keys.

Pros

User-friendly; easy to use
Allows the purchase of cryptocurrencies using fiat currencies.
The centralized authority guarantees maximum security and dependability.

Cons

Exposable to cyberattacks
Gathers a lot of info from their clients
Custodial

Decentralized Exchanges (DEX): What is DEX exchange?

Because there is no central authority on decentralized exchanges, it is much closer to the fundamental essence of Bitcoin. Servers are distributed globally to ensure that, in the event of an attack, not one computer can compromise the entire network. A DEX also does not require a KYC procedure, in contrast to CEXs. It is not facilitated by a central organization.

A decentralized exchange does not use any third party, authority, or financial regulators for monitoring or imposing regulations on the platform. This provides users control over their funds and private keys. This, in some way, imposes a high level of security and confidentiality for the users.

Pros

Security against hackers
Reduced fees and expenses
No fraud

Cons

Reduced liquidity
Limited functions
High transaction fees

Conclusion

Make sure that you understand the differences between the cryptocurrency exchanges before entering the world of cryptocurrencies, and find out more about your chosen exchange (no matter if it is centralized or decentralized). With this, you will be able to manage your trading wisely and protect yourself from any risks when it comes to crypto trading. You can also read our Beginner’s Guide To Crypto Wallets to crypto wallets.

The Pros and Cons of Cryptocurrencies: Beginner’s Guide

Beginner Nov 8, 2022

When cryptocurrencies first emerged, everyone knew of their endless potential to reshape the financial world as we know it. With its complex and somehow different structure, its very existence has somehow opened the eyes of everyone to borderless transactions without any intermediaries.

Several questions, however, remain—what is a cryptocurrency and how does it work? What are the pros and cons of cryptocurrencies? How do we know which cryptocurrency to invest in?

Let’s dive into it.

Cryptocurrency 101: The Pros and Cons of Cryptocurrencies

The Pros

1. High Rewards

There are more than 20,000 cryptocurrencies on the market today—each digital currency has its own function, utility, and perks. However, there is one common denominator within these cryptocurrencies: their tendency to spike up (and drop), depending on the crypto’s supply and demand. The more a cryptocurrency is used, the higher its price goes.

2. Secure Technology

The major reason why cryptocurrencies rose to fame is their inherently secure infrastructure—blockchain technology. More so, the decentralized nature of cryptocurrencies allows all transactions on the network to be tracked in real-time.

3. No Intermediaries

Since it lies on a decentralized infrastructure, cryptocurrencies completely eliminate intermediaries in transactions.

4. Round-the-Clock Trades

Crypto markets are always open—allowing crypto traders to trade anytime, anywhere. More so, coins are being mined and transactions are also recorded around the clock. This is in contrast to traditional trading markets and exchanges like NYSE or NASDAQ.

Now, let’s go to the Cons.

The Cons

1. High Risks

As a crypto trader, achieving high rewards come with high risks. The volatility of cryptocurrencies, like any form of investment, is risky. This is the reason why investors are advised to invest only what they can afford to lose.

2. Complex Infrastructure

Understanding cryptocurrencies and the technology behind them is a little complicated—it takes time and effort. For this reason, investors should practice DYOR (Do Your Own Research) before investing, to know the ins and outs of their investment.

3. Vulnerability for Newbies

While the security infrastructure of cryptocurrencies is intact, this does not mean it is 100% free from security breaches. There are existing issues in the crypto market like hacking, phishing, and several attempts to gain control over a network. This is something that new and experienced traders should look out for.

4. Long-term Investment Issues

At present, cryptocurrencies have not yet proven themselves as long-term investment. Not quite yet, at least. Stock markets and gold were founded centuries ago—it has a good track history already. The very first cryptocurrency ever released to the public is Bitcoin and that was just in 2008. It really is a risky investment, but still, it comes with high rewards.

Conclusion

Investing in cryptocurrencies requires thorough research and adequate trading knowledge. Before diving into the world of cryptocurrencies, make sure to understand it first—this way, you can maximize its benefits and advantages to grow your portfolio.