All You Should Know About Centralized Cryptocurrency Exchange
By Space Coast Daily // May 10, 2022
For the majority of the people, a centralized cryptocurrency exchange is a piece of essential equipment to make transactions and orders subjected to digital currencies. Furthermore, the centralized one leads the chart regarding cryptocurrency exchanges’ user base and popularity. Here you can read everything about Bitcoin for beginners.
The majority of famous exchanges like Coinbase and Binance are centralized, whereas few exchanges like Bisq are decentralized. Undeniably, the popularity of centralized exchange is pretty higher than a decentralized exchange, but many mainstream traders have publicly supported a few decentralized exchanges due to their low trading fees.
Undeniably, digital currency investors and traders find the notion of centralization in the exchange industry a bit weird as developers generate digital currencies to promote the non-availability of intermediaries. But the reason why people prefer to choose a centralized exchange over a decentralized one is that the user base alongside the trading volume of these exchanges is way more. So here reported are crucial facts you should know about cryptocurrency exchange.
Utilization of third parties!
When it comes to the centralized part of a cryptocurrency exchange, it usually refers to a third party or authorization presence in most of the actions being executed on that platform. For example, in the Coinbase cryptocurrency exchange, most of the operations are being controlled by the owner, development team, and technical team of that exchange. Usually, people trust these middlemen, mainly the infamous cryptocurrency exchange.
People draw an analogy between the cryptocurrency exchange and traditional bank as both work in a similar concept. Usually, centralized cryptocurrency exchanges are equipped with a non-custodial and custodial wallet. Still, to access the non-custodial wallet on a cryptocurrency exchange, you might have to pay extra charges as a non-custodial wallet alongside giving access to your digital currency holding, granting you access to the private key of that wallet.
The crucial distinction between a centralized and decentralized cryptocurrency exchange!
The majority of cryptocurrency investors use the centralized exchange to make buy orders with the help of fiat currencies. However, centralized cryptocurrency exchanges can execute orders between digital currencies correspondingly. For example, you can purchase BTC with ether. Therefore, decentralized exchanges are generally favored for executing orders in between cryptocurrencies.
Many people suggest not to buy cryptocurrencies using fiat currencies on a decentralized exchange. The trading volume on these exchanges is comparatively low, so executing orders on a decentralized exchange might take some time. Every cryptocurrency enthusiast is familiar with the primary distinction between a centralized exchange and a decentralized exchange, as it is the presence of middlemen.
The decentralized exchange performs every single task with the help of a trustless consensus mechanism, and peer to peer network on these platforms helps validate every transaction. However, as discussed above, the centralized cryptocurrency exchange is way ahead in popularity and trading volume. Still, mainstream investors claim that decentralized exchanges are the future of the exchange industry.
Several trading pairs!
Centralized cryptocurrency exchanges offer a less number of trading pairs than decentralized exchanges. The majority of the international cryptocurrency exchange with a centralized nature have merely listed authentic and trusted digital currencies. On the other hand, decentralized cryptocurrency exchange offers many digital currencies. If you want to trade in a new cryptocurrency, you can find that digital coin upon a decentralized exchange.
Prominent examples of the centralized cryptocurrency exchange are Coinbase, Binance, Kraken, crypto.com, etc. On the other hand, the mere prominent example of a decentralized cryptocurrency exchange is Bisq. Other cryptocurrency exchanges with decentralized attributes are infamous. For example, a popular decentralized cryptocurrency e-wallet that allows you to buy digital currencies is met mask.
Primary elements of a cryptocurrency exchange!
The cryptocurrency exchange industry is getting very competitive, and every single day a new centralized digital currency arrives. Therefore, many aspects decide whether a cryptocurrency exchange will be successful. But the key factor deciding the future potential of a cryptocurrency exchange is its trading volume.
The trading volume depicts two essential things: the user base of that exchange and the time it takes to execute one transaction. Higher trading volume means lesser time to execute transactions on that exchange.
The above-listed portion explains crucial facts regarding a cryptocurrency exchange with centralized attributes.