Unbiased Reviews of Cryptocurrency Exchanges in 2022
Cryptocurrency exchanges provide users with a platform to buy, sell, and trade their digital assets.
With a wide array of different options on the market, it can be quite hard for newcomers to chose the right crypto exchange.
In our guide, we will explain the basics principles behind them as well as help you choose the most suitable exchange for your needs.
Top 4 Cryptocurrency Exchanges
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.
Centralized exchanges are cryptocurrency exchange platforms that act as intermediaries between buyers and sellers of digital assets. Crypto exchanges usually have payment systems in place that make it possible for crypto traders to conduct digital assets exchanges or crypto-to-fiat currencies exchange, creating a form of a hybrid exchange platform.
How they work
- Centralized platforms are generally custodial. They hold user funds and digital currencies of crypto investors in crypto wallets and act as the central authority that authenticates all transactions.
- Centralized exchanges can improve user experience over time, guarantee additional security for crypto assets, and provide a wide range of featured services.
- Additionally, they work with government agencies and centralized authorities to ensure that their platform is not a tool for malicious activity. They carry out Know Your Customers and Anti-Money Laundering procedures to ensure that all customers are fully compliant with Anti-Money Laundering (AML)
DeFi (short for Decentralized Finance) refers to the decentralization of existing traditional financial services and products leveraging the use of blockchain. DeFi aims to host traditional financial services, such as banking and lending services, on blockchain technology, eliminating the need for middlemen and institutions like the actual banks themselves.
How they work
DeFi ecosystem is still in its early stages. The DeFi ecosystem is rapidly evolving at the moment, with several use cases yet to be identified. Such was the vision of Ethereum’s founder, Vitalik Buterin, who created the Ethereum blockchain to enhance the use cases of blockchain technology beyond a store of value
Ethereum’s smart contract functionality powers DeFi applications. Smart contracts are immutable self-executing programs that run on a blockchain that execute transactions based on certain predefined conditions. The smart contract only becomes active when all preconditions have been met, eliminating the need for financial intermediaries.
These smart contracts enable peer-to-peer transactions between buyers, sellers, lenders, and borrowers, with each transaction documented on the open blockchain ledger. This offers a more transparent, secure, and trustless financial system without depending on central authorities.