Cryptocurrency exchanges are platforms that provide users with the opportunity to carry out operations with digital coins and earn money via crypto trading and investing. A crypto platform can also be used on mobile devices – users can buy, sell and exchange crypto assets on the go using exchanges’ mobile applications. There are centralized and decentralized cryptocurrency exchanges. Let’s see the difference between these types of exchanges and their features.
Key Features of Centralized Cryptocurrency Trading Platforms
A centralized exchange (CEX) is a platform for conducting cryptocurrency transactions, offering users a specific list of cryptocurrency pairs, additional trading tools, and sometimes educational materials. Such large companies as Binance and Coinbase are centralized exchanges. To access a full set of tools, users are invited to go through the KYC verification process. For that purpose, they need to provide some documents for identification. The process may take several days.
When KYC is completed, the client can use the full range of exchange services, for instance:
- crypto exchange
- the ability to connect API (trading bots)
- spot trading
- margin trading
In the process of exchanging crypto assets, the user places an order to purchase certain crypto, the exchange reports the rate of the coin, and then the user pays the transaction fee and receives the coins. The price of cryptocurrencies on a centralized crypto platform is determined based on the order book of other users who buy and sell crypto. The client’s assets are stored on the platform’s wallets. CEX focuses on providing maximum security for users and the protection of their funds.
Examples of CEX: WhiteBIT, Coinbase, Kraken, Binance, etc. To identify CEX, check if it asks for KYC verification and if it allows buying coins with a bank card.
What is Special About Decentralized Exchanges?
DEX does not provide storage of crypto assets – currency stays in clients’ wallets, while DEX only helps to move them between wallets. In this case, the site is not responsible for the safety of clients’ assets. Decentralized cryptocurrency trading exchanges are good because they do not require user registration.
Experienced traders often have accounts on both CEX and DEX. DEX is suitable for quick trading with small amounts, and for long-term investments, it is better to open an account on a large centralized platform.