People are still skeptical about cryptocurrency. With fears of scams and people losing money fast, it can look like a scary trading platform. While it has never been easy to trade in crypto and scams, they do tend to happen. However, plenty of different exchange platforms are opening up to make crypto trading safe and comfortable.
Safety and security is the first thing that people look for when trading Bitcoin or any other type of cryptocurrency. There are plenty of places online that allow you to trade with anonymity and have intuitive interfaces to ensure ease of use. These new crypto exchanges enable crypto traders to trade for long-term investment or frequent trades. Now, before we tell you about the types of cryptocurrency exchanges, you will find let us tell you what cryptocurrency is.
What Is Cryptocurrency?
The word cryptocurrency is an amalgamation of two separate words. Crypto from the word cryptography, and the other is currency. According to Decryptionary, cryptocurrency is electronic money created with technology controlling its creation and protecting transactions while hiding its users’ identities. Cryptocurrency eliminates the need for banks, and all the transactions are done within the blockchain, which is a shared database.
What makes blockchain such a great database is the fact that no one entity controls it. A lot of different companies and people communicate and run the blockchain network, unlike a bank that holds and handles all the data. Keep A Bit Reviewed the entire sector to better understand the two types of cryptocurrency exchanges, and that’s what we will talk about now. So let’s begin!
Centralized exchanges are the first and most common type of crypto exchanges. Trading platforms like Coinbase, Binance, Kraken, and Gemini could all be considered a centralized exchange. These exchanges have the “Know Your Client” rule where they require users to register and put in their IDs. Centralized exchanges usually have active trading, high volumes of users, and liquidity.
However, you will hear many experts say that these exchanges aren’t aligned with the Bitcoin Philosophy because these exchanges are set up on private serves, leaving a single vector for attack. If the centralized server is attacked, the entire system can go down, and all the sensitive user data could be compromised. Keep a bit reviewed a few of the best centralized exchanges, and found out they usually offer insurance should their systems fail. Remember that even though you buy and store the cryptocurrency in these exchanges, you have no insurance if your device and information are compromised.
You will only be able to claim insurance if the exchange is at fault, so practicing safe storage is vital if you want to protect your money. So that covers centralized exchanges. Next up are decentralized exchanges so let’s start discussing them.
Decentralized exchanges work precisely like Bitcoin. It has no central point of control, and the entire system isn’t just one server, even though it acts like one server. Each computer of the server is spread out all over the world, and even though one person controls a computer, there is no one who has complete control of the server. This means that even if one of the computers is down, the entire network remains unaffected as the other computers keep the network functional.
Decentralized exchanges are among the safest types of cryptocurrency trading options out there because everything is spread out. Attacking several different locations at the same time is not only more challenging, but the attack will likely result in being unsuccessful.
Along with that, the exchanges’ decentralized nature exempts them from any regulatory body rules as a single entity is not controlling it. Because of this, the individuals usually come and go making it a place where a government or regulatory body cannot realistically pursue anyone. Decentralized exchanges are places where the users don’t have to declare their IDs, and people are free to use the platform as they please, regardless of whether it is legal or not. So that’s all the information you need to know about decentralized exchanges.
So there you go, that’s Keep A Bit‘s take on the two types of cryptocurrency exchanges out there. We are dedicated to helping you make safe and wise decisions when it comes to cryptocurrency. Our team will make sure to provide you with all the information you need to make the right decision when investing in cryptocurrency.
We will provide you with Keep A Bit reviews for the best cryptocurrency exchanges and other pertinent news about the sector. So with that being said, we arrive at the end for today. We will come back soon with something new for you. Until then, see ya!