In the last five to six years, cryptocurrencies have been the epicenter of a notable growth in digital assets and their value. As traders started to enter this market it became more and more professional, and many valid crypto exchanges have come to life.
WHAT IS A CRYPTO EXCHANGE?
A crypto exchange is a way for users to have comfortable access to various cryptocurrencies and countless users and liquidity with whom they can interact. An exchange is a fairly simple concept, with obvious complexity in its structure, but ever present in the financial markets, and very necessary for the connection of buyers and sellers, takers and makers. Blockchain technology has seen the rise of exchanges who specialise in the cryptocurrency ecosystem, and we want to explore the difference between exchanges who follow a traditional, centralised approach, and others who prefer to take decentralisation into their structure.
DIFFERENCES BETWEEN CEX AND DEX.
Centralised crypto exchanges rely on a central entity to provide liquidity, even though many times users can provide liquidity for certain assets in exchange for rewards; the centralised structure allows for more features and user friendliness in its interface, and can leverage a lot more trust from governments and authorities, as they can see that someone is in charge; this usually means they are compelled to enact KYC regulation (Know-Your-Customer). Centralisation also means higher security violation risks. Decentralised exchanges usually run on a blockchain, which means users are anonymous and there is lower risk of hacks and attacks; they operate without intermediaries, and usually rely on smart contract technology to put traders in contact.
HOW CAN YOU TELL IF AN EXCHANGE IS LEGIT?
Before trusting any exchange, you should always DYOR (Do Your Own Research). Reading their policy regarding security and plans in case of a Black Swan Event is always the right call, and you should also follow your position in the market: If you're in the early stages of your crypto adventure , you should probably opt for a mainstream, centralised exchange such as Binance, to then re.-evaluate your options once your expertise deepens.
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