If you are considering buying or selling crypto, the first thing on your mind should be an exchange. Whether the earlier centralized or the latest decentralized exchange would probably be your first port of call.
Information about where to trade crypto is highly important as knowing cryptocurrency itself before going into it. Asides from getting to know much about the token to trade, it is important to study your marketplace i.e. exchange.
Crypto exchanges usually have payment systems in place that make it possible for crypto traders to conduct digital assets exchange or crypto to fiat currencies exchange, creating a form of a hybrid exchange platform.
In this post, we’ll learn about centralized and decentralized exchanges. We’ll also discuss the differences between them as well as crypto coins/tokens from these digital marketplaces.
What is a Centralized Exchange (CEX)?
Centralized exchanges are cryptocurrency exchange platforms that act as intermediaries between buyers and sellers of digital assets.
CEX hold user funds and digital currencies of crypto investors in crypto wallets and act as the central authority that authenticates all transactions. They can improve user experience over time, guarantee additional security for crypto assets, and provide a wide range of featured services.
Centralized exchanges also work with government agencies and centralized authorities for security. They carry out Know Your Customers (KYC) and Anti-Money Laundering procedures. This is to ensure that all customers are fully compliant with Anti-Money Laundering (AML) Laws.
Examples of Centralized exchange are Binance, Coinbase, etc.
What is a Decentralized Exchange (DEX)?
Decentralized exchanges (DEX) are cryptocurrency exchange platforms without an intermediary. A growing number of exchanges are DEX today and are working on the shortcomings of the CEX.
Decentralized exchanges doesn’t involve a third party by making use of smart contracts. This help to facilitate trading between individuals, but doesn’t take control of their coins.
This is made possible in three ways: an on-chain order book, an off-chain order book, or an automated market maker approach.
Some of the decentralized exchanges in the crypto world today are Uniswap, SushiSwap, BurgerSwap, PancakeSwap, etc.
Centralized Exchange Vs Decentralized Exchange
The major difference between a centralized and decentralized exchange is their intermediary. For the much older centralized exchange, the crypto exchange platform act as an intermediary for buyers and sellers. In the case of decentralized exchange, there is no intermediary as transaction is being made on the blockchain.
To sign up on a centralized exchange, you have to provide banking details and identifying information, and deposit some cash. Whereas in a decentralized exchange, you don’t have to enter private information, such as social security numbers or addresses. This give users’ more privacy.
In CEX, the crypto exchange platform is the custodian of your asset, you don’t really hold them. The exchange are therefore in control of your private keys. In DEX, your assets are held in a wallet which has a private key you hold.
A centralized exchange can limit your access to your crypto, restrict or halt your ability to trade it, or even fall vulnerable to hackers. The appeal of decentralized exchanges, DEX advocates say, is security.
Centralized exchanges are generally far easier to use for newcomers/beginners. The fact that decentralized exchanges are still growing makes it less easy to use.
CEX can often offer fast trading because they’re not beholden to blockchain infrastructure. Transactions in DEX can be slower and expensive especially in an on-chain order book where transaction is written onto a blockchain.
There are options to earn and make profit on CEX. With DeFi, you save, borrow, lend, or trade without going through a bank or other financial institution. You can also mint a new token an swap.
Centralized exchange work like banks where you can have access to customer services. In decentralized exchange, the developers who created the protocol don’t have the same relationship with users. You’re basically in charge of your money.
Top Decentralized Cryptocurrency List
One of the key selling points of cryptocurrencies is that they are decentralized. That is, they have no central authority. Listed below are the top truly decentralized cryptocurrency.
1. Bitcoins
Bitcoin remains the most practically decentralized network in the world. Even large mining pools wouldn’t be able to exercise control over the Bitcoin network.
There are over ten thousand nodes on the Bitcoin network. This makes the Bitcoin network harder to takeover and solid enough to be called architecturally decentralized.
2. Ethereum
Ethereum is another highly decentralized network. The Ethereum network has seven thousand nodes compared to the Bitcoin network. We can say Bitcoin is in a better position when it comes to architecture decentralization.
Top Centralized Exchange Cryptocurrency List
Here are the top centralized exchange tokens. These tokens are used on the centralized exchange for several purposes. The top tokens are listed below.
1. Binance Coin (BNB)
Binance Coin is the native token of Binance, the biggest cryptocurrency exchange globally based on daily trading volume. BNB can be used for payment of goods and services. It can also be invested like other cryptocurrencies.
Since launching the BNB, the exchange has also benefited from increased investor interest in the token. It is currently ranked fourth among thousands of cryptocurrencies.
2. Cronos (CRO)
Cronos is the native token of a Crypto.com, a centralized crypto exchange. The coin trades by the symbol $CRO.
Cronos was launched by the Crypto.com company as part of its vision of “putting cryptocurrency in every wallet”. Today, Cronos is ranked 17th among thousands of Crypto assets by CoinMarketCap.
3. FTX Token (FTT)
FTT is the native cryptocurrency token of the crypto derivatives trading platform FTX. The team behind FTX comprises some of the largest crypto traders over the past few years.
The group of traders decided to launch their own platform having found issues with most mainstream crypto futures exchanges. Today, FTT is ranked 28th by CoinMarketCap.
Conclusion
Centralized exchange acts as an intermediary between buyers and sellers of cryptocurrency. Decentralized exchange has no intermediary as it make use of smart contracts.
Their are merits and demerits for both forms of cryptocurrency exchanges. DEX however is created to solve the shortcomings of the CEX. Decentralized exchanges generally try to embrace blockchain’s ethos of “trustlessness” and privacy”.
Also Read– What is DeFi?
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