Table of Contents Hide
- WHAT IS A CRYPTOCURRENCY EXCHANGE?
- HOW DO CRYPTOCURRENCY EXCHANGES WORK?
- WHAT TO KNOW BEFORE CHOOSING AN EXCHANGE
- AN EXAMPLE OF SOME OF THE BEST EXCHANGES
- HOW DO I OWN A BITCOIN EXCHANGE ACCOUNT?
If you want to learn more about finance through a new specialization known as cryptocurrencies, you’ll need to get engaged with one or more cryptocurrency exchanges. Coinmarketcap reports that this platform now tracks 304 spot exchanges with a cumulative 24-hour volume of $214.18 billion. This demonstrates how everyone these days appears to want cryptocurrency. You’ll need a crypto exchange to buy Litecoin, Bitcoin, Ethereum, and Dogecoin, or better yet, sell as an investor or trader to join in on the action.
WHAT IS A CRYPTOCURRENCY EXCHANGE?
A crypto exchange, to be precise, is a market where you can buy and sell cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Dogecoin, and others. There are several sorts of cryptocurrency exchanges, including:
#1. CENTRALIZED EXCHANGES (CEXs)
CEXs are the most well-known and traditional crypto exchanges. Crypto exchanges can be centralized, which means they are run by a single corporate entity, such as a brokerage firm that ensures trade security. CEX is a centralized platform where buyers and sellers meet, implying that someone manages and is accountable for your cryptocurrency. Binance, Coinbase, Houbi, and others are good examples.
#2. DECENTRALIZED EXCHANGES (DEXs)
DEX is essentially a service platform that links buyers and sellers of tokens who wish to trade them. In contrast to traditional CEX, smart contracts and decentralized applications are used to automate transactions and trades. Pancakeswap, Uniswap, Sushiswap, Babyswap, and other similar terms are examples.
Recently, hybrid cryptocurrency exchanges have been attempting to meet the needs of those mentioned above. They combine the rapid transaction speeds found in centralized platforms with the security assurance provided by keeping the private keys.
HOW DO CRYPTOCURRENCY EXCHANGES WORK?
Crypto Exchanges are often sites where people may purchase and trade cryptocurrencies. To better illustrate how a crypto exchange works depends on which exchange platform is being talked about as you are buying cryptocurrencies. In CEX, the exchange serves as an intermediary or investor’s custodian, holding the money of the investors in the same way that a bank would. CEX trading is done using the exchange’s database. DEXs operate on the underlying concept that cryptocurrencies were created for: no government controls or regulations. They have an automated procedure in place that oversees all transactions and does not rely on a firm to manage an investor’s assets.
WHAT TO KNOW BEFORE CHOOSING AN EXCHANGE
Many considerations are put in place before picking an exchange of choice, based on the historical aspect of the cryptocurrency market as a whole, specifically the cryptocurrency exchanges:
#1. AUTHENTICITY AND SECURITY:
The cryptocurrency market has been plagued by a slew of frauds and even exchange hacks, resulting in the loss of hundreds of thousands of dollars. Taking the time to conduct a comprehensive investigation before engaging pays off in terms of reducing risks.
#2. TRANSACTION FEES:
You have the option of choosing a platform with flat transaction charges or one with a more flexible structure. Anyway, cutting costs to keep your profits in good shape and, more importantly, eliminating trading headaches should come with a reasonable transaction fee, as different platforms charge differently.
#3. USER INTERFACE AND EXPERIENCE:
Many exchanges, such as Binance, are viewed as friendly to beginners to browse, but others, such as Bitfinex, are a pro-oriented exchange for trade. However, user experience is subjective, and different interfaces appeal to different people. It is easier to trade cryptocurrencies on an exchange with a user-friendly interface and a positive user experience.
Other considerations include supported cryptocurrency, deposit and withdrawal limitations, and so forth.
AN EXAMPLE OF SOME OF THE BEST EXCHANGES
Exchanges are ranked as good, better, or greatest based on various factors. Exchanges are ranked and scored by Coinmarketcap based on traffic, liquidity, trading volumes, and confidence in the legitimacy of reported trade volumes. The following are some of the finest exchanges:
Binance has a high level of popularity, with a trading volume above $13 billion per day, Binance is the largest. It serves over a hundred nations and trades over a hundred different tokens for chart and trading; it has a great user interface and an excellent user experience that allows both beginners and professionals to utilize it.
Coinbase is a popular choice among US traders. It is very secure and processes over $2 billion in daily trading activity. It caters to retail and institutional crypto traders, with the Coinbase Pro platform catering to professional traders and investors.
Other top exchanges on the list include Kraken, Probit, Bitfinex, and more.
HOW DO I OWN A BITCOIN EXCHANGE ACCOUNT?
Depending on the exchange of choice, creating an exchange account can be simple or difficult depending on how you access the exchange’s website and click to register or sign in. Most exchanges require you to supply your name and other accurate information such as your residence address, date of birth, nationality, and so on. Following the creation of an account, you must verify your account in compliance with AML and KYC regulations, which includes submitting some identification such as passports, ID cards, and so on. Verifications have account withdrawal benefits and, at times, account upgrades.
A great article about choosing cryptocurrency exchange. I was confused between Coinbase and Wazirx. After reading this article, I can choose the right one for me.