Crypto activities are incomplete without a crypto exchange platform. Rather, it can be said that the cryptocurrency platform sits at the crux of crypto activities. Whether you want to buy cryptos or sell off your holdings, you need to sign up with a crypto exchange. As of October 2022, you have over 600 exchanges today. A cryptocurrency platform usually caters to traders from multiple countries and accepts a wide range of currencies. These platforms allow a versatile range of payment options as well to cater to a diverse range of users with varied payment needs and preferences.

Cryptocurrency exchanges- overview

Crypto cannot be traded in traditional trading exchanges, such as stock exchanges. The crypto world needed a dedicated trading exchange that would be especially designed to execute trading activities in the crypto world. Thus, crypto exchanges were born.  Today, you have crypto exchanges all across the world and crypto trading activities are prevalent even in those countries that are yet to legalize crypto.

How does it work?

So, how does a cryptocurrency platform work?

Well, the primary function of a cryptocurrency platform is to execute trading activities. Whether you want to purchase crypto or sell off your holdings, you will need to register with a cryptocurrency platform.

Different functions of crypto exchanges:

●      Purchasing crypto- If you have to purchase crypto, the most popular portal is a cryptocurrency platform. These portals allow you to choose from a wide range of both new and traditional cryptos. However, try to look for bigger exchanges as they generally offer a more varied range of crypto options. A reliable cryptocurrency platform will generally allow users to buy crypto through various payment methods- credit card, debit card, wire transfer, bank transfer, and so on. It’s to note here that some exchanges accept cash and crypto payments both while some accept crypto payments only.

●     Selling crypto- You will have to go to a cryptocurrency platform if you have to sell off your crypto holdings. The cryptocurrency platform will connect you with a suitable buyer. The centralized exchanges follow an order book to execute the trade. But, the decentralized exchanges take the help of AMM systems (powered by smart contracts) to execute the trade.

●    Crypto conversion- Do you have to convert the crypto into regular fiat? Do you have to convert your crypto to another crypto? Well, in that case, you need the help of a cryptocurrency platform. These platforms will allow you to convert crypto, whether you want to convert it into another crypto or cash.

It must be mentioned here that a cryptocurrency platform is open for trading and other related activities 24/7. The exchanges generally charge a fee or commission for executing trading activities. You will have to pay a fee every single time you will execute a trade through crypto exchanges. Now, the level of fee would vary from one cryptocurrency platform to another. Thus, it’s important that you take a thorough market survey on at least 5-6 different crypto platforms before you finally sign up with one. The price of cryptos could also vary from one cryptocurrency platform to another. You can buy crypto from one exchange and sell it off to another cryptocurrency platform if you get a better price. This form of trading is officially termed as “arbitrage trading”.

Cryptocurrency platforms- types

The discussion would be incomplete without the mention of the different kinds of cryptocurrency exchanges. The two primary crypto exchanges are- Centralized and Decentralized.

Centralized exchange

This cryptocurrency platform is operated and controlled by a centralized authority. This centralized authority serves as a prime custodian of funds deposited in the platform and takes care of the fund security as well. But you should know two very important things here- one, you will have to meet the KYC procedure if you want to create your account at a centralized cryptocurrency platform. The other thing is, you won’t be able to transfer the funds from the exchange wallet to another wallet.

Best bits about centralized exchange

●        Takes steps to eliminate fraud traders

●        Wide range of cryptos to choose from

●        High liquidity

●        High processing speed

●        Accepts fiat payment

Cons of centralized exchange

●        Does not allow fund transfer

●        Charges high fees

●        Susceptible to hacking attacks

Decentralized exchange

Unlike the centralized counterpart, the decentralized exchange is not operated and controlled by any centralized authority. Rather, this cryptocurrency platform operates in a more liberal and flexible decentralized environment. Also, these platforms do not ask for KYC compliance. So, registration is always much faster and easier with decentralized exchanges.

Best bits about decentralized exchange

●        Decentralized and flexible atmosphere

●        Almost impenetrable defense against hackers

●        Faster registration

●        Allows transfer of funds from exchange wallet to 3^rd party wallet

●        Lesser fees than centralized crypto exchanges

Cons of decentralized exchange

●        Slower processing speed

●        Lack of liquidity

●        Does not accept fiat payment

Hybrid exchange

The cryptocurrency world is fast evolving and coming up with new developments to ensure a more enhanced experience for the crypto users. One of the latest developments that have received much kudos from the crypto and the overall fintech world is the launch of hybrid cryptocurrency exchanges.

Hybrid exchanges are a compilation of the good parts of both decentralized exchanges and centralized exchanges. So, like the DEXs, the hybrid ones assure the transfer of funds as well as lower fees, and also protection against hacking.  On the other hand, hybrid exchanges assure higher liquidity and faster processing speed as well, taking inspiration from CEXs.

Final words

We will conclude the post with a word or two about cryptocurrency exchanges.

Always study multiple crypto exchanges before you make the final call. Your chosen cryptocurrency platform should allow operation in your jurisdiction. Not all crypto exchanges accept traders from every single country out there. Then, another thing that you must check is the security features practiced by the exchange. Your chosen one might not be able to assure complete 100 percent safety but what’s more important is whether or not the exchange has adopted the upgraded security features. A reliable cryptocurrency platform will always assure cold storage, 2FA authentication, and insurance.