Cryptocurrencies are still known to be quite a new terminology for people all around the world. We all know that the very first cryptocurrency to set foot in the world was Bitcoin. This cryptocurrency was launched around the world in January 2009. Though the first step was taken years ago, this crypto industry is still in its infancy period. Check out the Bitcoin Android User Guide if you want to start trading bitcoins.
These articles will help you in creating a better understanding of the types of cryptocurrencies and their exchange platforms. Moreover, this article will show you a detailed analysis of the comparison of centralized vs. decentralized currencies and platforms and will make it easier for you people to learn the differences.
Categories of Cryptocurrencies
The crypto exchange platforms can be categorized into three different types mentioned below:
- Centralized exchanges (CEX)
- Decentralized Exchanges (DEX)
- Hybrid Cryptocurrency Exchanges
Below is a detailed description of all categories of cryptocurrency exchange platforms.
Centralized Exchange or CEX is one of the most famous exchange platforms in the crypto world. This exchange is the traditional exchange platform for crypto exchanging and trading. Centralized platforms are regulated by some sort of central authority. Such types of exchanges are administered by a firm that provides various options for crypto-to-crypto trading as well as fiat (paper currency) -to the crypto gateway.
Centralized Exchange is a place where the buyers present on the platform meet the sellers, which refers to this that there is someone who is handling your crypto assets and is held responsible. For trading on these platforms, you can easily use the order books or technical analysis tools on advanced exchange platforms.
If we look at centralized exchanges, we will find them a blessing as they are user-friendly and pretty much easy to use. This platform has an outstanding user interface that provides its users with quick responses. Some of the CEX, you can simply just register yourselves and mention your passcodes, and boom, you can trade.
Centralized Exchanges offer speedy customer support, several trading pairs, and paper currency retreats. The majority of the time, the users can benefit from extra services, including staking, saving opportunities, or Initial Exchange Offers (IEOs). These exchanges also have services known as Decentralized Exchanges (Defi).
On the contrary, on a centralized exchange platform, the user cannot be the owner of the personalized keys, which leads to the chances of hacking and other cybercrimes. Also, some people are not comfortable with sharing their personal information in the Know Your Customer (KYC) process. These all factors sometimes make this exchange a barrier for a lot of people.
To your knowledge, some of the centralized exchanges are Binance, Coinbase, and Huobi.
A decentralized Exchange platform is a substitute for a Centralized Exchange Platform, but the only difference is there is no regulatory authority or centralized authority. In this type of exchange, there is no company in charge of the assets. If we compare the traditional Centralized Exchange worth Decentralized Exchange, the transactions made on this platform are automated by using smart contracts.
If we see both platforms, Centralized Exchange is safer and more secure as it has no chance of any sort of security breach and cyber crimes if the smart contract is properly written.
Ethereum is known to be the cryptocurrency with the most modified blockchain, having the most number of coins (ERC-20 tokens). Various decentralized exchange platforms work on using Ethereum and its smart contract. But these platforms can be even more upgraded by launching Decentralized Finance (Defi) on an interoperable platform such as Polkadot.
As no company owns the responsibility for operating and regulating the decentralized exchanges, the government authorities cannot shut them off. The most prominent DEXs are Binance DEX and Uniswap.
Hybrid Cryptocurrency Exchange
The name itself refers to what this exchange means. This kind of exchange platform uses both CEX and DEX. If we say this platform is a combination of both centralized and decentralized, it will not be wrong. A hybrid cryptocurrency exchange offers high-speed transactions and security assurance to its customers.
Hybrids are the new era of the crypto trading market but are still developing and improving. The most renowned hybrid exchanges are Nash and Qurrex.
When it comes to choosing the right exchange platform for you, it is totally up to you as you will determine which one fits the best for your needs. If people want to purchase cryptocurrency by using fiat currency, they will have to go for CEX or HEX. For trading in multiple altcoins, you need to go for DEX.