What are Cryptocurrency Exchanges?
Cryptocurrency exchanges operate like stock or currency exchanges where the exchange of one currency for another takes place. Using this platform, users exchange one cryptocurrency to another or for fiat. Furthermore, these exchanges are used for buying and selling cryptocurrencies.
Cryptocurrency exchanges are of different types, depending on their services. Various kinds of cryptocurrency exchanges are listed below:
- Centralized Exchanges: These crypto exchanges have a centralized operator who takes care of its security, upgrades and functionality, along with managing public relations. The software used to run its operations is also centralized. Most of the big crypto exchanges including Binance, Bitfinex, and Kraken fall under this category.
- Decentralized Exchanges: Unlike Centralized exchanges, these exchanges are not under the control of one central authority. The exchange is constructed with a set of smart contracts that are instilled to enable trustless exchange of tokens. Etherdelta and IDEX are most popular exchanges under this category which are built on Ethereum.
- Crypto broker Exchanges: This kind of exchange operates just like a centralized exchange, but is different in the sense that they are completely compliant with all of US regulations. In fact, they are compliant with all the regulations of whichever country they operate in. No centralized exchange possesses that kind of license. At the time of writing, only Coinbase is considered as a Crypto broker exchange.
- Instant Exchanges: If you are trading on Instant Exchanges, you are not trading against a trader but with the very service. These exchanges posses large pools of cryptocurrencies enabling instant exchange of coins. However, they are more expensive than the rest as the user pays for miner’s fees, along with comparatively higher exchange fees. Some examples of instant exchanges are Shapeshift, Godex and Changelly.
- Hybrid Crypto Exchanges: As the name suggests, Hybrid crypto exchanges are an amalgamation of the features of decentralized and centralized exchanges. They have the security of decentralized exchanges and the usability and ease of the centralized one. These exchanges may have centralized operating system but have high-end security systems that keep crypto assets as safe as they will be in your wallet. Some examples of Hybrid crypto exchanges are EXMO, CEX and Bitstamp.