Unbiased Reviews of Cryptocurrency Exchanges in 2023
Cryptocurrency exchanges provide users with a platform to buy, sell, and trade their digital assets.
In our guide, we will explain the basics principles behind them as well as help you choose the most suitable exchange for your needs.
What Are Cryptocurrency Exchanges?
- Simply put, a cryptocurrency exchange is any platform that facilitates the exchange of digital currencies to another digital currency or to its fiat equivalent. Fiat currency is any currency issued by a government and supported by a country’s central bank
- You can think of crypto exchanges as the traditional foreign exchange market. In this case, instead of exchanging fiat currencies, you are buying and selling crypto. When it comes to traditional exchanges, a select few hold a monopoly over the market. In comparison, crypto exchanges are widespread, offering a plethora of unique features for users.
Cryptocurrency Exchanges – Buy Your Crypto Safely
Back in November 2008, “Satoshi Nakamoto“ first spoke about a “peer-to-peer” digital currency which he referred to as Bitcoin. Over a decade later, Bitcoin is unquestionably at the forefront of a digital currency revolution. At its core, cryptocurrency is a movement that seeks to eliminate the “middle-man”. Heralded as a modern replacement for fiat money, cryptocurrency represents a solution to a world heavily affected by globalization. As a result of its simplicity, crypto has gained widespread acceptance amongst the general public. The main method of acquiring crypto is through different cryptocurrency exchanges. As previously stated, there is a wide array of different exchanges to choose from. That’s why it is important to buy crypto from reputable sites.
Centralized Exchanges vs. Decentralized Exchanges
There are two types of cryptocurrency exchanges: centralized exchanges (CEXs) and decentralized exchanges (DEXs).
- A centralized exchange is typically run by a central entity like a corporation or a firm.
- The entity takes full charge of the security of transactions and verifies every crypto purchase made through its platform.
- All security on the platform and all their holdings including your personal crypto assets. Those assets are stored on their unique online wallets that are controlled by the platform.
- Decentralized exchanges, on the contrary, do not need the superstructure of third parties. They are automated and run on the blockchain itself.
- Thanks to smart contracts it became possible to set up agreements that are fulfilled automatically.
- This means cheaper transfers, low-cost transactions and investments, and more efficient access to the funds for all participants.
You should take into account that both CEXs and DEXs have their pros and cons. For example, CEXs tend to have a lot of liquidity. This makes the entire process of trading crypto a lot easier for the average enthusiast. Through the use of CEXs, it takes a matter of seconds to complete a transaction. This is especially true for in-demand cryptocurrencies that have bigger liquidity pools such as Bitcoin, Tether, and Ethereum.
DEXs on the other hand have limited liquidity. They typically rely on independent liquidity providers or LPs to function. This can make transactions of crypto assets a bit challenging. However, a decentralized exchange enjoys autonomy. Unlike centralized exchanges that solely rely on the cooperate entity behind them to run, decentralized exchanges can run on their own provided there are enough people willing to join the network.
A centralized crypto exchange (CEX) allows users to buy and sell cryptocurrencies through a centralized authority. CEXs act as intermediaries by facilitating trades between buyers and sellers. New traders often use CEXs because of their high liquidity and fast trade speeds, as well as their user-friendly interface and the option to trade with fiat currency.
However, CEXs also have risks, such as the potential for hacks and mismanagement due to their control over users’ assets, and the requirement for KYC and AML procedures which may invade users’ privacy. Despite these risks, CEXs remain a popular choice for many cryptocurrency traders.
How To Use A Centralized Exchange
When using a centralized exchange, it is important to choose a reputable platform for a safe and successful trading experience. Users should consider factors like fees, security measures, and available cryptocurrencies when making their final decision.
Do Your Research
The first step any potential user should take is to do their homework. Among the wide plethora of centralized exchanges available, not all are equal. The three main factors users should closely look at are:
- Fees: Look for an exchange with reasonable fees.
- Security: Choose an exchange with strong security measures.
- Available cryptocurrencies: Ensure the exchange offers the coins you want to trade.
Set Up Your Account
To use a centralized exchange, you need to create an account and verify your identity through the Know Your Customer (KYC) process. This process involves providing personal information and is required to meet legal requirements and prevent financial foul play.
To buy cryptocurrency on a centralized exchange, a user must first deposit funds into their account using methods such as a bank transfer, credit card, or external wallet transfer. There may be limits on how much can be deposited at a time, depending on the exchange and location. After depositing funds, the user can choose their desired cryptocurrency.
After depositing funds and selecting your preferred coin, you can begin purchasing crypto. Using market orders is the most typical way to purchase cryptocurrency. Users can purchase cryptocurrency at the current market price by using market orders. Customers can also set a price at which they want to purchase a particular cryptocurrency. Limit orders are used to accomplish this. Last but not least, users can employ stop-loss orders to make their purchases. You can use them to set the most money you are willing to lose on a deal.
Withdraw Your Funds
In order to withdraw funds, users need to place a sell order on the exchange and request a withdrawal to their bank account. Once the order is filled, the money will be deposited into your bank account. Remember that certain exchanges have withdrawal limits, so you might have to make several withdrawal requests to get all of your money.
Decentralized exchanges (DEXs) are peer-to-peer marketplaces through which users can trade cryptocurrencies directly with each other. Transactions are facilitated through smart contracts, and DEXs are usually non-custodial, meaning users control their own private keys and assets. Smart contracts are computer programs that carry out an agreement’s terms when certain conditions are met. They are coded and stored on a blockchain network, making them transparent, traceable, and irreversible. Because there is no single point of control, decentralized exchanges offer a higher level of security and anonymity than centralized exchanges. Additionally, they provide their users with more control over resources and lower the possibility of loss through hacking or poor administration.
Decentralized exchanges, on the other hand, may have slower trade speeds and may not provide the same level of liquidity as centralized platforms. New users who are unfamiliar with the technology, may also have a steeper learning curve. Despite these obstacles, decentralized exchanges are becoming a more popular option for cryptocurrency traders seeking a more secure and private trading experience.
How To Use A Decentralized Exchange
While the basic principles still remain the same, using a decentralized exchange (DEX) is a bit different from using traditional centralized exchanges. Users only need a compatible wallet and do not need to disclose any personal information. With a compatible wallet, anyone can access the financial services offered by DEXs and participate in peer-to-peer trading. While the basic principles still remain the same, using a decentralized exchange (DEX) is a bit different from using traditional centralized exchanges. Still, trading on a DEX can be an unfamiliar experience for new users. Here’s a quick guide to using a DEX:
Choose a Decentralized Exchange
When choosing a decentralized exchange (DEX), consider the following factors: fees, supported cryptocurrencies, user interface, and security measures. Research the different options and select a DEX that meets your needs. Look for DEXs with low fees, a wide range of supported cryptocurrencies, and a user-friendly interface. Also, consider the security measures like two-factor authentication and secure infrastructure, a DEX employs.
Set Up Your Wallet
As previously stated, you will need a wallet to use a decentralized exchange. Choose a wallet that is compatible with the DEX you intend to use and safeguard any private keys or passwords associated with it.
Sign Up For The DEX
To open an account on a decentralized exchange (DEX), go to the DEX’s website and follow the sign-up instructions. Enter your personal information, such as your name, email address, and a strong password. Keep in mind that you might also need to upload a government-issued ID or another form of identification to some DEXs in order to prove your identity.
Deposit Crypto Into Your Account
To make your cryptocurrency available for trading on a DEX, you will need to transfer it from your wallet to the DEX. You can do this by sending the cryptocurrency from your wallet to the DEX’s deposit address. Once the transfer is complete, the cryptocurrency will be available for trading on the DEX.
Find a Trading Pair & Place an Order
DEXs often list trading pairs, which are combinations of two different cryptocurrencies that you can trade. A trading pair like “ETH/BTC,” for instance, indicates that you can exchange Ethereum for Bitcoin or vice versa. You can place an order to purchase or sell a specified amount of cryptocurrencies at a certain price once you’ve selected the trading pair you wish to trade. On DEXs, you can frequently put limitations on your orders by indicating the highest price at which you are willing to buy a cryptocurrency or the lowest price at which you are willing to sell it.