There are more than 1600 digital currency exchanges across the world that hold a combined market value of more than $289 billion.
The widespread and mass adoption of cryptocurrencies is assisting the crypto sector to grow immensely. Thus, various digital currency exchanges have emerged to fulfill the needs of modern infrastructures and cryptocurrency enthusiast requirements.
Crypto Online Exchange enables investors and traders to buy crypto with fiat or local currencies like the yen, dollars, or euros, etc. in addition to this, cryptocurrencies like bitcoin and ether are also allowed for purchasing digital currencies, yet not every exchange provides this facility.
However, the set of laws and standards for regulating crypto exchanges vary jurisdiction-wise, and all come up with the same objective, securing the digital crypto ecosystem.
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Cryptocurrency Exchanges – Brief Overview of Types
Digital cryptocurrency exchanges provide online services that allow investors to buy or sell digital assets, all in one place. However, most fiat-to-crypto exchanges are focused on rendering facilities of trading to cash instant profits.
Other than this, few platforms allow customers to exchange digital currencies like Bitcoin for other cryptocurrencies. There are three types of worldwide cryptocurrency exchanges, let’s dive into them.
Centralized Cryptocurrency Exchanges
This type of fiat-to-crypto exchange is also termed CEX, which works similarly to stock exchanges. The customer who could be a buyer or seller pays a visit to the digital platform and the exchange plays the role of intermediaries.
In the cryptocurrency market, centralized means blindly trusting the exchange to handle funds. However, these types of exchanges are highly exposed to hacks and breaches. Therefore, there is a rigid set of AML and KYC regulations for these changes to ensure customers’ wealth remains in safe hands.
Furthermore, the CEX is preferred as they have the power to facilitate large cryptocurrency trading volume, robust investing schemes, and liquidity. Additionally, such exchanges are particularly for beginners that hold insufficient knowledge.
Decentralized Cryptocurrency Exchanges (DEX)
Decentralized is another type of crypto online exchange that emerged with the objective of ensuring anonymity. These exchanges don’t rely on middle-man or third-party intermediaries to hold or invest customers’ wealth.
It’s the crypto marketplace where both buyer and seller come and carry out transactions directly. Making it more clear, such exchanges providers Peer-to-Peer (P2P) trading services. These are quite hard to hack, thus all the investment remains secure.
However, these platforms due to lack of significance can hold low volumes and liquidity of assets. Additionally, making a transaction on such a platform does not require identity verification procedures but, if the customer needs to exchange crypto for fiat they might undergo these procedures.
Hybrid Cryptocurrency Exchanges
The third type of cryptocurrency exchange is hybrid, which is considered the next-generation digital crypto money marketplace. Hybrid exchanges are a combination of both decentralized and centralized exchanges.
Specifically, this type of exchange aims to deliver the functionality of centralized exchanges to provide higher liquidity along with the security of decentralized exchanges to secure the transactions. Thus, crypto analysts also believe that hybrid crypto exchanges are the true future of digital crypto money trading.
Manage and Store Digital Assets With Crypto Wallets
Like conventional wallets, a blockchain-powered wallet enables individuals to store and utilize digital currencies and other virtual assets.
As the crypto adoption rate is increasing and people are looking at digital money as investment assets, digital wallets are becoming trendy. Here are the basic key points that investors need to know before choosing to hold cryptocurrencies or assets.
These types of wallets are applications that can be installed on smartphones. However, some of the digital wallet apps are non-hosted, which means the entity will be responsible for the consequences of storing and holding private keys to access virtual assets of cryptocurrencies.
Furthermore, this type of wallet provides hot storage as it can be paired with a cryptocurrency exchange, but some companies may require additional security checks for accessing offline known as cold storage.
This type of wallet aims to provide utmost security in order to secure the investors’ cryptocurrencies and virtual assets placed in it.
However, hardware wallets can easily be attached to laptops or computers through USB to transfer the transactions, the way of storing digital crypto money in cold storage.
The increase in the demand for cryptocurrencies and other blockchain-powered assets is calling for more secure and rigid crypto exchanges along with digital wallets.
The online crypto exchange is the middle party that allows investors a platform to store, hold and trade cryptocurrencies.