UNDERSTANDING CRYPTO EXCHANGES.

over 2 years ago

Hello guys, I’ve decided to share my understanding of crypto exchanges. I hope you’re having an amazing weekend.

Cryptoexchanges are platforms that offers the abilities to trade, transfer and convert cryptocurrencies in exchange for other currencies, equivalent value or assets.
Cryptoexchanges are simple digital markets where you can sell and buy crypto and that’s why people buy cryptocurrencies basically just so they can sell or exchange them something’s for daily profits. Cryptoexchange can be in a way of converting from one coin to another like from Bitcoin to Eth, it can also be through biting crypto using the regular currency like buying five hundred dollars worth of cryptocurrency.

Cryptoexchnages connects buyers to sellers and can make money by the transaction fees charged and commissions.
Some of the ways of exchanging crypto currencies is through peer to peer which is also known as P2P which are very popular. It is the method of buying and selling amongst individuals which offers maximum confidentiality and anonymity. This can be by way of OTC which where when people buy crypto over the counter. All is required is for supply to meet demand without the need for any middle man.

People are constantly asking what cryptoexchanges are the best to use but I’m not entirely sure that that’s feasible, there’s no best exchange that suits the need of every user but it’s all tied around preferences, interests and goals for the exchange you’re looking to make. However, exchange platforms need to be secured and should also have large trading volume and liquidity as well as access to the coins needed.

Centralized and Decentralized Exchanges.

CEX exchanges uses similar model to the regular traditional asset exchanges like the New York stock exchange. CEXes happen to be popular among the crypto circle. They offer both exchanges from crypto to other cryptocurrencies as well as fiat to crypto and they do so on a very large scale. CEX are equally user friendly and allows for simple purchases and management of cryptocurrencies

They keep digital order and books of buy and sell orders communicating both prices and the volume of trades.
Some popular crypto exchanges in the world are Binance, Coinbase, CEX.io etc. Centralized exchanges are popular as I’ve mentioned before and most importantly secure due to the existence of a third party or a leadership team that assumes responsibilities. Binance exchange processes more than $20 billion transactions daily and that’s just insane.

Decentralized exchanges on the other hand are a type of cryptoexchange which basically allows for peer to peer transactions of cryptocurrencies, on a secure network without any need for a third party or intermediary. There’s no company in charge of handling or overseeing the assets on defi platforms.

Now decentralized exchanges are validated or automated by the use of smart contracts which does not easily allow room for breaches, tweaks, adjustments or manipulation. Smart contracts exist on the blockchain and operate as computer codes and cannot be changed.

Decentralized exchanges It is not subject to government regulations as there’s so particular company in charge of it. So, not only can it not easily be hacked it is also difficult to be shut down. This is reason Nigerians mostly use peer to peer model of transactions as you can’t really trace the trades to anyone. Binance Dex and Uniswap are great examples of decentralized exchanges.
Dex can also struggle with liquidity due to its low trading volume, there’s also no fiat payments unlike the centralized platforms.

These are just my basic understanding at the moment though I’ve already written about the use of Defi platforms. Thank you for reading.